If the MPC is 0.75 and the tax rate is 10%,the expenditure multiplier will equal
A) 0.48.
B) 1.48.
C) 3.08.
D) 3.6.

Name: If the MPC is 0.75 and the tax rate is 10%,the expenditure multiplier will equal A) 0.48. B) 1.48. C) 3.08. D) 3.6.
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Question

Quizplus · Accepted Answer

The expenditure multiplier is calculated as 1 / (1 - MPC * (1 - tax rate)). Here, MPC is 0.75 and the tax rate is 0.10. So, the multiplier is 1 / (1 - 0.75 * (1 - 0.10)) = 3.08.

If the MPC Is 0