In an economy with no income taxes or imports, if the multiplier is 5, what does the MPC equal?
A) 0.9
B) 0.4
C) 0.8
D) 0.5
E) 0.2

Name: In an economy with no income taxes or imports, if the multiplier is 5, what does the MPC equal? A) 0.9 B) 0.4 C) 0.8 D) 0.5 E) 0.2
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Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), so if the multiplier is 5, then 5 = 1/(1-MPC). Solving for MPC gives MPC = 0.8.

In an Economy with No Income Taxes or Imports, If