If the value of the multiplier is 3.33 and there are no imports or income taxes, then the value of the
A) MPS is 0.3.
B) MPC is 0.7.
C) Both of the above answers are correct.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

The multiplier formula is: 
Multiplier = 1 / (1 - MPC)
3.33 = 1 / (1 - MPC)
1 - MPC = 1 / 3.33
MPC = 1 - (1 / 3.33)
MPC = 0.7
Therefore, the MPC is 0.7 and we can conclude that the MPS is 0.3 (since MPS + MPC = 1). So, both answer choices A and B are correct.

If the Value of the Multiplier Is 3