To find out how far the caterpillar can crawl in 1 minute, we can multiply the distance it crawls in 1/4 of a minute by 4.
Distance in 1/4 of a minute: 1/2 inch
Distance in 1 minute: (1/2 inch) * 4 = 2 inches
Therefore, the caterpillar can crawl 2 inches in 1 minute. So the answer is C. 2 inches.