If the marginal propensity to consume is .9 and there is a $3 billion increase in planned investment, national income will increase by

Name: If the marginal propensity to consume is .9 and there is a $3 billion increase in planned investment, national income will increase by
Brand: Quizplus
Rating: 4.8 (45 reviews)

Question

Quizplus · Accepted Answer

The multiplier effect is calculated as 1/(1-MPC). With an MPC of 0.9, the multiplier is 10. Therefore, a $3 billion increase in investment will increase national income by $3 billion * 10 = $30 billion.

If the Marginal Propensity to Consume Is