If the MPC is 0.5, what must the spending multiplier be?
A) 1.2
B) 2
C) 2.25
D) 2.5

Name: If the MPC is 0.5, what must the spending multiplier be? A) 1.2 B) 2 C) 2.25 D) 2.5
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Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. In this case, the MPC is 0.5, so the spending multiplier would be 1/(1-0.5) = 2. Therefore, the correct answer is B.

If the MPC Is 0