A marginal propensity to consume of 0.84 results in a multiplier of
A)6.25.
B)1.19.
C)0.16.
D)0.84.
E)1.84.

Name: A marginal propensity to consume of 0.84 results in a multiplier of A)6.25. B)1.19. C)0.16. D)0.84. E)1.84.
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Question

Quizplus · Accepted Answer

The formula for the multiplier is 1/(1-MPC), where MPC is the marginal propensity to consume. Plugging in 0.84 for MPC, we get 1/(1-0.84) = 1/0.16 = 6.25. Therefore, the multiplier is 6.25, which corresponds to answer choice A.

A Marginal Propensity to Consume of 0