When the MPC is 0.5 and t is 0.2, then the government spending multiplier is about -1.67.

Name: When the MPC is 0.5 and t is 0.2, then the government spending multiplier is about -1.67.
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Question

Quizplus · Accepted Answer

The formula for the government spending multiplier is 1/(1-MPC(1-t)). Plugging in the values given, the calculation is 1/(1-0.5(1-0.2)) = -1.67. Therefore, the statement is true.

When the MPC Is 0