Identify the statement which is not true related to investment mutipl…

The correct answer is option (2) : When MPC = 0, Multiplier in equal to infinity

Option 1: When MPC = MPS, Multiplier in equal to 2 : This is true.

Since MPC + MPS always equals 1, if MPC = MPS, then both must be equal to 0.5 (or 50%).

Multiplier (k) = 1 / MPS

k =1/0.5 = 2

Option 2: When MPC = 0, Multiplier in equal to infinity. This is false.

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

k= 1/(1-0) = 1

Option 3: The least value of Multiplier is unity. This is true.

The smallest practical value of the multiplier occurs when MPC is 0 (or 0%), which means that households save all additional income. In this case, the multiplier formula simplifies to:

Multiplier=1 / (1-MPC)

k= 1/(1-0) = 1

Therefore, the statement that the least value of the multiplier is unity (1) is accurate because it corresponds to the scenario where MPC is 0 and there is no multiplier effect.

Option 4: The Multiplier represents the proportional relationship between change in income and change in investment. This is true.