Discuss briefly the working process of investment multiplier (K), assuming that Change in Investment (ΔI) is ₹ $\displaystyle 4,000$ crore and Marginal Propensity to Consume (MPC) is $\displaystyle 0$·5.

The working of multiplier is based on the fact 'one's expenditure is other's income'.Given, the increase in investment is ₹ $\displaystyle 4,000$ crores and Marginal Propensity to Consume is $\displaystyle 0$·$\displaystyle 5$:

Rounds	ΔI	ΔY	ΔC	ΔS
$\displaystyle 1$	$\displaystyle 4000$	$\displaystyle 4000$	$\displaystyle 2000$	$\displaystyle 2000$
$\displaystyle 2$		$\displaystyle 2000$	$\displaystyle 1000$	$\displaystyle 1000$
$\displaystyle 3$		$\displaystyle 1000$	$\displaystyle 500$	$\displaystyle 500$
—		—	—	—
Total	$\displaystyle 4000$	$\displaystyle 8000$	$\displaystyle 4000$	$\displaystyle 4000$

The above table shows that an increase in investment of ₹ $\displaystyle 4,000$ crores leads to a total increase of ₹ $\displaystyle 8,000$ croresWorking Note: K = \frac{1}{1-MPC} = \frac{1}{1-0.5} = \frac{1}{0.5} = 2 K = \frac{\Delta Y}{\Delta I} 2 = \frac{\Delta Y}{4,000} ΔY = ₹ $\displaystyle 8,000$ crore