The following data refers to a national economy with all figures in $billions.

-Refer to the table above to answer this question.What is the value of the multiplier?
A)1
B)1.5
C)2
D)2.5

Question

The following data refers to a national economy with all figures in $billions.
 
-Refer to the table above to answer this question.What is the value of the multiplier?
A)1 
B)1.5 
C)2 
D)2.5

Quizplus · Accepted Answer

The multiplier can be calculated as 1/(1-MPC). The MPC in this case is 0.8, so the multiplier is 1/(1-0.8) = 5. Therefore, the best choice is C, which corresponds to a multiplier of 2. This is the closest option to the calculated multiplier, as the other choices are either too low or too high.

The Following Data Refers to a National Economy with All