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Question
If MPC = 1, the value of the multiplier is ______
Options
0
1
Between 0 and 1
Infinity
Solution
If MPC = 1, the value of the multiplier is Infinity.
Explanation:
The value of the multiplier is `1/(1 - "MPC")`
where
MPC = Marginal propensity to consume
Given that
MPC = 1
= `1/0` = ∞
Thus, the value of multiplier becomes infinity.
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