What is the range of values of investment multiplier? Clarify the relation of investment

multiplier with marginal propensity to consume (MPC) and with marginal propensity to

save (MPS). (6)

An investment multiplier determines the financial impact of a public or private project on the economy.

Investment increases productive capacity that raises the level of output, employment and income. When investment increases by a certain amount, aggregate income increases by a multiple of that investment.This multiple is called investment multiplier.

MPC is the increase in the amount of consumption from the increase in the income of the person.

Multiplier=1/(1-MPC)

If MPC is high the value of multiplier will also be high.

Marginal propensity to save (MPS) refers to the proportion of any extra income that is saved by consumers.

MPS = 1-MPC

So if MPS increases then MPC decreases, and we know when MPC decreases then multiplier also decreases.