In the short run, an increase in investment spending can raise national income by more than the initial amount because of the:
Correct answer: B. Keynesian investment multiplier
- A. Balance of payments identity
- B. Keynesian investment multiplier
- C. Law of diminishing returns
- D. Principle of absolute advantage
Explanation
The investment multiplier reflects repeated rounds of spending generated when one person's expenditure becomes another person's income. Its size depends partly on the marginal propensity to consume and leakages from the circular flow.
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About Economy of Pakistan
Pakistan's economy is examined through agriculture, industry, services, trade, remittances, employment, population, poverty and regional development. The topic also covers GDP and national income, inflation, fiscal and monetary policy, taxation, public debt, the balance of payments, energy constraints and structural challenges, including the role of the State Bank and development planning.
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