Question

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

Options

• 0

• 1

• Between 0 and 1

• Infinity

Answer 1

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.