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8 April, 07:54

If the marginal propensity to consume is 0.8, (a) what is the value of the multiplier?

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  1. 8 April, 08:13
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    Given the marginal propensity to consume (MPC), the miltiplier is given by

    Multiplier = 1 / (1 - MPC)

    Given that the marginal propensity to consume is 0.8, the multiplier is given by

    Multiplier = 1 / (1 - 0.8) = 1 / 0.2 = 5
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