Question

Find MPC when investment multiplier = 1.

• A. 1.2
• B. 1
• C. 0
• D. 1.5

Answer 1

The correct option is C

0

M(multiplier) $=\frac{1}{1-MPC}$

Given that, $\frac{1}{1-MPC}=1\Rightarrow 1=1-MPC$

$\Rightarrow$ MPC = 1 - 1 = 0

Thus, when M = 1, MPC = 0.