How large will the total change in income be from a change in investment of $15 if the marginal propensity to consume is .8?

Question

Quizplus · Accepted Answer

The total change in income from a change in investment can be calculated using the multiplier effect formula, which is 1/(1 - MPC), where MPC is the marginal propensity to consume. Here, MPC = 0.8, so the multiplier is 1/(1 - 0.8) = 5. Therefore, the total change in income = 5 * $15 = $75.

How Large Will the Total Change in Income Be from a Change