The maximum value of multiplier is when the value of MPC is _________.

Infinity, zero

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Infinity, one

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One, infinity

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None of these

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Solution

The correct option is D Infinity, zero
Investment multiplier refers to the number of time by which the increase in output or income exceeds the increase in investment. It is measured as the ratio between change in income and change in investment and it is denoted as 'k'.
Multiplier(k) => Change in income / change in investment = 1/ {1-MPC(c)} where c is the marginal propensity to consume.
Therefore, the value of multiplier will be maximum when the value of MPC is either infinity or zero.

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Similar questions

There is a direct relationship between MPC and value of investment multiplier.

State whether the following are true or false. Give reasons:

(a) At zero level of income, savings are positive.

(b) The relationship between multiplier and MPC is inverse and that with MPS is direct.

(d) The value of MPS can be negative.

Find out the value of the multiplier, if MPC is zero.

If MPC = 0.9, then value of multiplier will be :

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