In the simple Keynesian expenditure model, a marginal propensity to consume of .9 leads to an expenditure multiplier of
A) .1.
B) .9.
C) 9.
D) 10.

Name: In the simple Keynesian expenditure model, a marginal propensity to consume of .9 leads to an expenditure multiplier of A) .1. B) .9. C) 9. D) 10.
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Quizplus · Accepted Answer

The expenditure multiplier is calculated as 1/(1-MPC). With an MPC of 0.9, the multiplier is 1/(1-0.9) = 10.

In the Simple Keynesian Expenditure Model, a Marginal Propensity to Consume