Q. 175.0( 1 Vote )

Discuss briefly t

Answer :

There exists an inverse relationship between the marginal propensity to save and investment multiplier.

K = 1/MPS

The higher the value of the marginal propensity to save, the lower is the value of investment multiplier.

For example, the value of the marginal propensity to save falls from 0.7 to 0.5, the value of investment multiplier will increase from 2 to 5.


(i) Full employment- Full employment is a situation of no involuntary unemployment.

(ii) Involuntary unemployment- Involuntary unemployment is a situation when a person who is willing and able to work is unable to find work.

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