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Multilplier is the ratio by which a given increase in investment brings about an increase in the national income. The extent of the increase in income ranges from 1 to infinity depending on the mariginal propensity to consume (MPC) and marginal propensity to save (MPS). Multiplier is symbolised by the aphabet "K" and its value is calculated as under:
1 1
K = ------------------------- = -----------------------
1-MPC MPS
If MPC =1, K = infinity and if MPC = 0, K = 1 and in between there are numerous ratios, depending on the data in a question.
Multiplier can also be defined as the reciprocal of marginal propensity to save because K = 1/MPS
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