The government increases spending by R10 billion during a time of economic slowdown when output is less than full employment output.The marginal propensity to withdraw is 0.9.What is the value of the multiplier?

Question

Quizplus · Accepted Answer

The multiplier is calculated using the formula: K = 1 / (1 - MPC). In this case, MPC = 0.9, so K = 1 / (1 - 0.9) = 10. Therefore, the answer is D.

The Government Increases Spending by R10 Billion During a Time