If the marginal propensity to consume (MPC) is 0.75, the value of the spending multiplier is:
A) 0.
B) 1.
C) 4.
D) 5.

Name: If the marginal propensity to consume (MPC) is 0.75, the value of the spending multiplier is: A) 0. B) 1. C) 4. D) 5.
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Quizplus · Accepted Answer

The spending multiplier is calculated as 1/MPS (marginal propensity to save) or 1/(1-MPC). In this case, MPC is 0.75, so MPS is 0.25. Therefore, the spending multiplier is 1/0.25, which equals 4.

If the Marginal Propensity to Consume (MPC) Is 0