Suppose an economy can be described by the consumption function C = 250 + 0.90Y_D and I = $300.What is the multiplier? A)0.1. B)0.9. C)3. D)10

Name: Suppose an economy can be described by the consumption function C = 250 + 0.90Y D and I = $300.What is the multiplier? A)0.1. B)0.9. C)3. D)10
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Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. Here, MPC is 0.90, so the multiplier is 1/(1-0.90) = 10.

Suppose an Economy Can Be Described by the Consumption Function