If households spend $0.95 of each additional dollar of increased income,the expenditure multiplier will be

Name: If households spend $0.95 of each additional dollar of increased income,the expenditure multiplier will be
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Quizplus · Accepted Answer

The expenditure multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. Here, MPC is 0.95, so the multiplier is 1/(1-0.95) = 1/0.05 = 20.

If Households Spend $0