Given C = 200 + 0.75Y_D,the multiplier is A)0.25. B)0.75. C)4. D)1.33.

Question

Quizplus · Accepted Answer

The multiplier in an equation of the form Y = a + bX is equal to b, the coefficient of the independent variable. In this case, the independent variable is Y_D, which has a coefficient of 0.75. Therefore, the multiplier is 0.75. However, since the question asks for the answer in terms of the multiplier concept, which is the change in equilibrium output relative to a change in autonomous expenditure, we use the formula 1/(1 - MPC), where MPC is the marginal propensity to consume, which is equal to the coefficient of the independent variable in this case. Therefore, the multiplier is 1/(1 - 0.75) = 4.

Given C = 200 + 0.75YD,the Multiplier Is

Given C = 200 + 0.75Y_D,the Multiplier Is