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

True

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False

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Solution

The correct option is A
True

True, there is a direct relationship between MPC and value of investment multiplier. Higher the value of MPC, higher the investment multiplier and vice cersa. Because,

$M = \frac{1}{1 - M P C}$

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Similar questions

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 MPC when investment multiplier = 1.

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