If the marginal propensity to consume is 0.7,the expenditure multiplier is
A) 7.0
B) 0.7
C) 3.0
D) 3.3
E) not determinable without additional information.

Name: If the marginal propensity to consume is 0.7,the expenditure multiplier is A) 7.0 B) 0.7 C) 3.0 D) 3.3 E) not determinable without additional information.
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Question

Quizplus · Accepted Answer

The expenditure multiplier is calculated as 1/(1-MPC). With an MPC of 0.7, the multiplier is 1/(1-0.7) = 1/0.3 = 3.3.

If the Marginal Propensity to Consume Is 0