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Deficit in BoP refers to a situation when receipts of the country arising out of autonomous transactions are less than the corresponding payments to the rest of the world during the period of an accounting year. It highlights our net liabilities towards rest of the world.
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Yogita Ingle 6 years, 7 months ago
Investment Multiplier refers to increase in national income as i multiple of a given increase in Investment. Its value is determined by MPC. The value equals:
Multiplier = 1/1-MPC or 1/MPS
Suppose increase in investment is Rs.1000 and MPC = 0.8. The increase in National Income is in the following sequence.
(i) Increase in investment raises income of those who supply investment goods by Rs.1000. This is the first round increase.
(ii) Since MPC = 0.8, the income earners spend Rs.800 on consumption. This raises the income of the suppliers of consumption goods by Rs.800, This is second round increase.
(iii) In the similar way, the third round increase in Rs.640 = 800 x 0.8. In this way national income goes on increasing round after round.
(iv) The total increase in income is Rs.5,000 which equals. △Y = △I x 1/1-MPC △Y = 1000 x 1/1-0.8 = Rs.5000

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Akash Mishra 6 years, 7 months ago
1Thank You