Question

Explain the meaning of Investment Multiplier. What can be its minimum and maximum value?

Answer 1

The minimum value of investment multiplier is 1.

Investment multiplier=11−mpc

so, when value of mpc=0, investment multiplier=1.

Answer 2

Answer:When investment expenditure increases, there is multiple increase in income. The rates of increase in income to increase in investment expenditure are the value of multiplier. Its value equals 1/1-MPC or 1/MPS or △Y/△I Its minimum value is ‘one’ while maximum value is infinity.