The Investment Multiplier (\(k\)) measures the impact of an investment change on national income. Its formula is:
\(k = \frac{\Delta Y}{\Delta I}\)
where \(\Delta Y\) is the change in national income and \(\Delta I\) is the change in investment. The following data is provided:
- Investment Multiplier (\(k\)) = 5
- Change in national income (\(\Delta Y\)) = ₹800 crore
The objective is to determine the corresponding change in investment (\(\Delta I\)). The Investment Multiplier formula can be rearranged to solve for \(\Delta I\):
\(\Delta I = \frac{\Delta Y}{k}\)
Substituting the given values yields:
\(\Delta I = \frac{800}{5}\)
\(\Delta I = 160\)
Therefore, the increase in investment is ₹160 crore.