If investment spending increases by $1 billion when the marginal propensity to consume is .75, national income will increase by

Name: If investment spending increases by $1 billion when the marginal propensity to consume is .75, national income will increase by
Brand: Quizplus
Rating: 4.9 (48 reviews)

Question

Quizplus · Accepted Answer

The multiplier effect is calculated as 1/(1-MPC). With an MPC of 0.75, the multiplier is 4. Therefore, a $1 billion increase in investment spending will increase national income by $4 billion.

If Investment Spending Increases by $1 Billion When the Marginal