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Give the meaning of investment multiplier. Write its formula.

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Investment multiplier is the ratio of the total increment in equilibrium value of final goods output to the initial increment in autonomous expenditure. Its formula is

Investment Multiplier = ∆Y/∆A= 1/1-c.

Where, ∆Y is the total increment in final goods output, ∆A is initial increment in autonomous expenditure and c is size of the multiplier.

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