Question

Calculate the value of the multiplier if the MPC = `1/2` or 0.5 and = `3/4`.

Answer 1

The multiplier K is calculated as:

K = `1/(1-MPC)`

Therefore if MPC = `1/2` or 0.5;

K = `1/(1 - 1/2)`

= `1/(1-0.5)`

= `1/0.5`

= 2

If MPC = `3/4`,

K = `1/(1 - 3/4)`

= `1/(1-0.75)`

= `1/0.25`

= 4