The multiplier effect in economics quantifies the increase in total income resulting from an initial spending injection. The multiplier (K) is calculated using the formula:
\(K = \frac {1}{(1 - MPC)}\)
Here, MPC represents the Marginal Propensity to Consume. Given that
\(MPC + MPS = 1\)
the multiplier can also be expressed in terms of MPS (Marginal Propensity to Save) as:
\(K = \frac {1}{MPS}\)
Initially, with an MPS of 0.4, the multiplier is:
\(K_{initial} = \frac {1}{0.4} = 2.5\)
When the MPS rises to 0.5, the new multiplier is:
\(Knew = \frac {1}{0.5}= 2\)
The decrease in the multiplier from 2.5 to 2 indicates that an increase in MPS leads to a reduction in the multiplier's size. Therefore, the multiplier's size would be decreased.
The correct answer is: The size of the multiplier would be decreased
The more widespread aspect of the globalisation of agriculture is the entry of multinationals into this sector as sellers of agricultural inputs such as seeds, pesticides and fertilisers. Over the last decade or so, the government has scaled down its 'agricultural development programmes and agricultural extension' agents have been replaced in the villages by agents of seed, fertiliser and pesticide companies.
Based on the given passage, answer the following question :
(a) How is agriculture becoming more commercialised?
Differentiate between social change and social movement.