If the marginal propensity to consume is 0.8, the value of the multiplier is:
A) 0.8.
B) 5.
C) 1.25.
D) 2.

Name: If the marginal propensity to consume is 0.8, the value of the multiplier is: A) 0.8. B) 5. C) 1.25. D) 2.
Brand: Quizplus
Rating: 4.9 (31 reviews)

Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC) where MPC is the marginal propensity to consume. In this case, the multiplier is 1/(1-0.8) = 5. Thus, the correct answer is B.

If the Marginal Propensity to Consume Is 0