The letters Y, C, I_g, X, and M stand for GDP, consumption, gross investment, exports, and imports respectively.Figures are in billions of dollars.C = 26 + .75Y I_g = 60
X = 24
M = 10
The multiplier for the above economy is:

Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. Here, MPC is 0.75, so the multiplier is 1/(1-0.75) = 4.00.

The Letters Y, C, Ig, X, and M Stand for GDP

The Letters Y, C, I_g, X, and M Stand for GDP