The number of times that the increase in output or income exceeds the increase in investment is referred to as the investment multiplier. It is denoted by the letter ‘k’ and is defined as the ratio of change in income to change in investment.
When there are infinite times of change in income or MPC=1, the highest value of the multiplier might be Infinity.
1/ Multiplier(k) (1-MPC)
1/ = (1-1)
1/0 =
= Infinity.
Final Answer:
When MPC is 1, the highest value of the multiplier is infinite. It means that the economy is absorbing all of the extra money.
When MPC = 0, the multiplier has a minimum value of one. It means that the economy is putting all of the extra money into savings.