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If MPC = 1, the value of the multiplier is ______ - Economics

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MCQ
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If MPC = 1, the value of the multiplier is ______

Options

  • 0

  • 1

  • Between 0 and 1

  • Infinity

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Solution

If MPC = 1, the value of the multiplier is Infinity.

Explanation:

The value of the multiplier is `1/(1 - "MPC")`

where

MPC = Marginal propensity to consume

Given that

MPC = 1

= `1/0` = ∞

Thus, the value of multiplier becomes infinity.

Concept: Investment Multiplier and Its Mechanism
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