What will be the value of multiplier if entire additional income is converted into additional consumption?
Answer & explanation
Correct answer: option 3
k= \(\frac{ 1}{ \text 1 - MPC}\)
If the person is consuming the entire increase in income that means his MPC = 1
Thus, k= \(\frac{1 }{\text 1 - 1 }\) = \(\frac{1 }{0 }\) which is equal to infinite.
If the person is consuming the entire increase in income that means his MPC = 1
Thus, k= \(\frac{1 }{\text 1 - 1 }\) = \(\frac{1 }{0 }\) which is equal to infinite.