The following data relates to a national economy (all figures in $billions):

-Refer to the above graph to answer this question.What is the value of the multiplier?
A)0.5.
B)1.
C)2.
D)$600.

Question

The following data relates to a national economy (all figures in $billions):
 
-Refer to the above graph to answer this question.What is the value of the multiplier?
A)0.5. 
B)1. 
C)2. 
D)$600.

Quizplus · Accepted Answer

The value of the multiplier is determined by the formula: Multiplier = 1 / (1 - MPC). From the graph, the MPC (marginal propensity to consume) is 0.5, therefore: Multiplier = 1 / (1-0.5) = 2.

The Following Data Relates to a National Economy (All Figures