If the multiplier is 5,the marginal propensity to consume must be 0.8.

Name: If the multiplier is 5,the marginal propensity to consume must be 0.8.
Brand: Quizplus
Rating: 4.9 (49 reviews)

Question

Quizplus · Accepted Answer

The formula for the multiplier is 1/(1-MPC), where MPC is the marginal propensity to consume. Therefore, if the multiplier is 5, we can calculate the MPC as follows:

5 = 1/(1-MPC)
5(1-MPC) = 1
5 - 5MPC = 1
MPC = (5-1)/5
MPC = 0.8

Therefore, if the multiplier is 5, the marginal propensity to consume must be 0.8.

If the Multiplier Is 5,the Marginal Propensity to Consume Must