If the MPC is 0.8 out of YD and if government levies a net tax rate of 0.3, then the MPC out of national income (Y) becomes:

Question

Quizplus · Accepted Answer

The MPC out of national income (Y) can be calculated by adjusting the MPC out of disposable income (YD) by the net tax rate. Given an MPC of 0.8 out of YD and a net tax rate of 0.3, the MPC out of Y is calculated as MPC out of YD multiplied by (1 - tax rate), which is 0.8 * (1 - 0.3) = 0.8 * 0.7 = 0.56.

If the MPC Is 0