If the consumption function is C = 100 + 0.6Y, then the multiplier is:

Name: If the consumption function is C = 100 + 0.6Y, then the multiplier is:
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Question

Quizplus · Accepted Answer

The multiplier is the change in equilibrium output relative to a change in autonomous spending. The formula for the multiplier is 1/(1-MPC), where MPC is the marginal propensity to consume. In this case, the MPC is 0.6. So the multiplier is 1/(1-0.6) = 2.5. Therefore, the correct answer is C.

If the Consumption Function Is C = 100 + 0