If there are no taxes or imports and MPC = 0.67, the multiplier is
A) 6.
B) 1.5.
C) 0.33.
D) 3.

Question

Quizplus · Accepted Answer

In this scenario, since there are no taxes or imports, the only component of the GDP formula is consumption (C). Therefore, the multiplier equals 1/MPC (where MPC is the marginal propensity to consume). 
Thus, the multiplier = 1/0.67 = 1.49 (rounded to 1.5) which is closest to choice D. Therefore, the best choice is D.

If There Are No Taxes or Imports and MPC =