-In the above table, there are no taxes and no imports or exports. The value of the multiplier for this economy is
A) 0.75.
B) 1.33.
C) 4.0.
D) 0.25.

Question

-In the above table, there are no taxes and no imports or exports. The value of the multiplier for this economy is
A) 0.75. 
B) 1.33. 
C) 4.0. 
D) 0.25.

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. If there are no taxes, imports, or exports, the entire income not saved is spent, implying an MPC of 0.75 (since if not saved, it's spent). Thus, the multiplier is 1/(1-0.75) = 4.0.

-In the Above Table, There Are No Taxes and No