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Question
What can be the maximum value of multiplier?
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Solution
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'.
The maximum value of
the multiplier can be Infinity when there in infinite times of change in income
or MPC=1.
Multiplier(k) = 1/ (1-MPC) = 1/(1-1) = 1/0 = Infinity
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'.
The maximum value of
the multiplier can be Infinity when there in infinite times of change in income
or MPC=1.
Multiplier(k) = 1/ (1-MPC)
= 1/(1-1)
= 1/0
= Infinity
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