If the marginal propensity to consume is 4/5, the value of the multiplier is:
A)20.
B)5.
C)1
D)1/5
E)0.8.

Name: If the marginal propensity to consume is 4/5, the value of the multiplier is: A)20. B)5. C)1 D)1/5 E)0.8.
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Question

Quizplus · Accepted Answer

The value of the multiplier is calculated as 1/(1-MPC) where MPC is the marginal propensity to consume. So, the value of the multiplier in this case would be 1/(1-4/5) which equals 5. Therefore, the correct answer is B) 5.

If the Marginal Propensity to Consume Is 4/5, the Value