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

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23-10-2017
Mathematics

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

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nobillionaireNobley nobillionaireNobley · Answer 1 · 2017-11-04T21:56:22+01:00

nobillionaireNobley nobillionaireNobley

04-11-2017

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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