If planned aggregate expenditure in an economy can be written as: PAE = 1,000 + 0.5Y,what is the income-expenditure multiplier in this economy?

Name: If planned aggregate expenditure in an economy can be written as: PAE = 1,000 + 0.5Y,what is the income-expenditure multiplier in this economy?
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Quizplus · Accepted Answer

The income-expenditure multiplier is equal to 1/(1-MPC), where MPC is the marginal propensity to consume. In this case, MPC = 0.5, so the multiplier is 1/(1-0.5) = 2.0.

If Planned Aggregate Expenditure in an Economy Can Be Written