Assume that the parameters of a particular economy are as follows: MPC = 0.9,MPM = 0.3.What is the value of the multiplier?
A)0.4.
B)0.6.
C)1.67.
D)2.5
E)10.

Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1 - MPC + MPM), where MPC is the marginal propensity to consume and MPM is the marginal propensity to import. Substituting the given values, we get 1/(1 - 0.9 + 0.3) = 1/(0.4) = 2.5.

Assume That the Parameters of a Particular Economy Are as Follows