If the multiplier is 3.33 and there are no imports or income taxes, then the
A) MPC is 0.7.
B) MPS is 0.3.
C) Both of the above answers are correct.
D) None of the above answers are correct.

Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC) or 1/MPS. Given a multiplier of 3.33, this implies that 1/MPS = 3.33 or MPS = 0.3, and since MPC + MPS = 1, then MPC = 0.7. Therefore, both statements are correct.

If the Multiplier Is 3