Zero MPC implies zero multiplier.

True

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False

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Solution

The correct option is B
False

False. Because Multiplier $= \frac{1}{1 - M P C}$

When MPC = 0, $= \frac{1}{1 - 0} = \frac{1}{1} = 1$

Therefore, when marginal propensity to consume is zero, the value of multiplier will be one. It means that increase in income will just be equal to increase in investment.

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Similar questions

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

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.

Correlation implies causation. State true or false.

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