Investment multiplier means the rate of change in national income due to change in investment. Thus.
Multiplier =
Multiplier depends on the value of marginal propensity to consume (MPC). Marginal propensity to consume is the proportion of income that is consumed out of additional income. When there is increase in investment, there will be increase in the income of some persons who will again spend it on consumption goods which will again become the income of producers of consumption goods. Higher marginal propensity to consume means higher consumption which induces producers to produce more resulting in increase in national income. Thus, investment multiplier is positively related to marginal propensity to consume.
Multiplier coefficient is obtained by following formula : K = \(\frac{1}{1-MPC}\)
It implies that higher the marginal propensity to consume, higher will be the multiplier. Minimum value of investment multiplier can be one because minimum value of MPC can be zero.