Question

What is the range of invesment multiplier? Clarify the relation of investment multiplier with marginal prppensity to consume (MPC) and with marginal propensity to save (MPS).

Answer 1

Range of Investment Multiplier =One to Infinity.
Relation : If MPC rises, investment Multiplier also rises, i.e. there is positive relationship between MPC and investment multiplier (K). However, if MPS rises, investment multiplier falls, i.e. there is an inverse relationship between MPS and investment multiplier (K).