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If the marginal propensity to consume (MPC) is 0.75, what is the value of the multiplier?
Economics
ScanSolve AI Answer
Step-by-step solution
3 steps1. If the marginal propensity to consume (MPC) is 0.75, the value of the multiplier is:
Recall the formula for the multiplier ().
The multiplier is calculated using the marginal propensity to consume (MPC) with the formula:
Substitute the given MPC value into the formula.
Given MPC = 0.75.
The value of the multiplier is 4.
Select the correct option.
Comparing the calculated value with the given options:
A. 2
B. 4
C. 1.33
D. 0.25The calculated value matches option B.
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