(i) Payfent towards past debts:
If a portion of the additional income is used for repayment of old loan, the MPC is reduced.
(ii) Non availability of consumer goods:
The multiplier theory assumes instantaneous supply of consumer goods following demand. But there is often a time lag.
(iii) Full employment situation:
Under conditions of full employment, resources are almost fully employed.
(iv) So additional investment will lead to inflation only rather than generation of additional real income.

(i) Constant capital output ratio is unrealistic.
(ii) Resources are available only before full employment.
(iii) Excess capacity in capital goods industries is assumed.
(iv) It will work only when credit is available easily.

Uses of multiplier
1. Multiplier highlights the importance of investment in income and employment theory.
2. The process throws light on the different stages of trade cycle.
3. It also helps in bringing the equality between S and I.
4. It helps in formulating Government policies.
5. It helps to reduce unemployment and achieve full employment.

i. The marginal propensity to consume is equal to Rs.15/Rs.20 = 0.75.
ii. The consumption function is linear because the marginal propensity to consume is constant and therefore the slope is the same throughout all income levels.