Question

If entire additional income is converted into additional consumption, the value of multiplier will be

• A. $2$
• B. $0$
• C. $1$
• D. $\infty$

Answer 1

The correct option is D

$\infty$

Multiplier = $\frac{1}{1-MPC}$

If entire additional income is converted into additional consumption, MPC = 1.

Therefore, the value of multiplier will be infinity.