What will be the correct option which fits best in the below statement?

Investment Multiplier will be high when _________

MPC is high

The correct answer is option 1: MPC is high

There is a direct relation in MPC and Investment Multiplier. That means when MPC increases Investment Multiplier also increases and vice-versa.

The formula for the investment multiplier is:

k=1/(1-MPC)

When MPC is high, 1−MPC is low, making the denominator in the multiplier formula smaller. This results in a higher multiplier.