If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is
A) 0.25.
B) 0.50.
C) 0.75.
D) 1.00.

Name: If the multiplier is 4 and there are no imports or income taxes, the marginal propensity to consume is A) 0.25. B) 0.50. C) 0.75. D) 1.00.
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Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as 1 minus the marginal propensity to save (MPS). Given a multiplier of 4, the formula for the multiplier is 1/(1-MPC) = 4, which implies that MPC = 0.75.

If the Multiplier Is 4 and There Are No Imports