With an increase in marginal propensity to consume the value of investment multiplier will :
Answer & explanation
Correct answer: option 1
The correct answer is option (1) : Increase
The Multiplier Formula: Multiplier = 1 / (1 - MPC)
Impact of MPC:
As the MPC increases (more consumption from each additional income), the value in the denominator (1 - MPC) gets smaller. This results in a larger value for the multiplier.
Relationship: A higher multiplier signifies a greater impact on national income from a change in investment. So, an increase in MPC leads to a stronger multiplier effect.