The software and related services sector has a multiplier effect on the Indian economy with every one-rupee input spent by the" information technology sector" producing an increase in real GDP by two rupees. www.ft.com, 2/28/2008
According to the story, if ________ in the software and related services sector increases by $15 billion, real GDP will increase by ________.
A) investment; $30 billion.
B) consumption; $30 billion.
C) consumption; $2 billion.
D) investment; $2 billion.

Question

Quizplus · Accepted Answer

The correct answer is based on the multiplier effect described, where every one-rupee input in the information technology sector results in a two-rupee increase in real GDP. Therefore, if investment increases by $15 billion, real GDP will increase by $30 billion.

The Software and Related Services Sector Has a Multiplier Effect