When the value of MPC is 1, the value of the investment multiplier will be ____________.
Answer & explanation
Correct answer: option 4
MPC and multiplier have positive relation. When MPC is maximum, then multiplier will be maximum. Maximum MPC can have value 1 as MPC + MPS =1. So, when MPC = 1, then multiplier = \(\frac{ 1}{\text {1 - MPC}}\) = \(\frac{1 }{\text 1 - 1 }\) = C