Question

An increase in the investment at national level directly increases the

• A. National Income
• B. Gross National Product
• C. Personal Income
• D. Disposable Income

Hint:

Macroeconomic Multiplier: $\Delta \text{National Income } (Y) = \text{Multiplier } (k) \times \Delta \text{Investment } (I)$.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Macroeconomic investment multiplier: autonomous capital investment directly expands aggregate equilibrium National Income via the Keynesian multiplier effect.
Key Formula or Approach:
\[ \Delta Y = k \cdot \Delta I = \frac{1}{1 - \text{MPC}} \cdot \Delta I \]

Step 2: Detailed Explanation:
In macroeconomic theory:
- National Income (Y) is determined by aggregate demand ($Y = C + I + G + (X - M)$).
- An autonomous increase in capital Investment ($\Delta I$) directly stimulates employment, production, and factor payments, generating a magnified multi-round expansion in National Income ($\Delta Y$) governed by the Keynesian investment multiplier ($k = 1/(1-\text{MPC})$).

Step 3: Final Answer:
Therefore, an increase in investment directly increases National Income, matching option (A).