Calculate the change in consumption ( C) and change in income ( Y) using two consecutive data points from the table.

Geography

ScanSolve AI Answer

Answer

C\text{C}

Step-by-step solution

3 steps

To find the value of the multiplier, we first need to calculate the Marginal Propensity to Consume (MPC). The multiplier is then calculated using the formula M=11−MPCM = \frac{1}{1 - MPC}.

  1. Calculate the change in consumption (ΔC\Delta C) and change in income (ΔY\Delta Y) using two consecutive data points from the table.

    Let's use the data points where income changes from 180to180 to 200:
    When income (Y1Y_1) is 180,consumption(180, consumption (C_1)is) is 164.
    When income (Y2Y_2) is 200,consumption(200, consumption (C_2)is) is 180.

    ΔC=C2−C1=180−164=16\Delta C = C_2 - C_1 = 180 - 164 = 16 ΔY=Y2−Y1=200−180=20\Delta Y = Y_2 - Y_1 = 200 - 180 = 20
  2. Calculate the Marginal Propensity to Consume (MPC).

    MPC=ΔCΔYMPC = \frac{\Delta C}{\Delta Y} MPC=1620MPC = \frac{16}{20} MPC=0.8MPC = 0.8
  3. Calculate the multiplier using the MPC.

    M=11−MPCM = \frac{1}{1 - MPC} M=11−0.8M = \frac{1}{1 - 0.8} M=10.2M = \frac{1}{0.2} M=5.0M = 5.0

    The value of the multiplier is 5.0.

    The final answer is C\text{C}.

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