Answer to Question #213115 in Macroeconomics for Adnan

Question

Derive investment multiplier from Y=C+I and interpret

Answer 1

A multiplier is an economic element that affects increases or changes in many other related economic variables when it is increased or changed.

The ratio of $ΔY$ to $ΔI$ is called the investment multiplier. It can be derived, as follows, from the equilibrium condition $(Y = C + I + G)$ together with the consumption equation $(C = a + bY)$ .