Question

Calculate the marginal propensity to consume if the value of multiplier is 4.

Answer 1

Y = C + I

ΔY = ΔC + ΔI

Dividing both sides by ΔY, we will obtain

K = 1/1-MPC

Given value of multiplier is 4, then MPC will be

`k = 1/(1-MPC)`

`4 = 1/(1 -MPC) = 4(1-MPC) = 1`

4 - 4MPC = 1

-4MPC = 1 - 4

-4MPC = -3

MPC= 0.75