Identify the true statement from the given statements?

Value of investment multiplier varies between one and infinity. The minimum value of investment multiplier is 1. It can never be less than one because MPC is never negative. At least it is = 0, and at most it is = 1.

Case 1: MPC = 0, M (or multiplier) = 1/(1−MPC)

=1/(1−0)=

1/1=1

Case 2: MPC = 1, M=1/(1−MPC)=1/(1−1)

=1/0

=∞

So that, value of M (multiplier) always varies between 1and∞.

Option 1: MPC (Marginal Propensity to Consume) measures the slope of the consumption curve, not the income curve.

Option 2: If MPS= 0, then MPC =1- MPS = 1- 0 = 1. So,

                 Multiplier(k) = 1/ (1-MPC) = 1/ (1-1) 

                      = 1/0

                      = Infinity

 

Option 3: The value of APC (Average Propensity to Consume) cannot be zero since it is defined as the ratio of consumption expenditure to disposable income. As long as there is any consumption expenditure, APC will have a positive value.