Question

In the multiplier formula \[K=\frac{1}{1-c}\], the symbol c represents:

Options

• The initial autonomous expenditure

• The total change in national income

• The Marginal Propensity to Consume (MPC)

• The Marginal Propensity to Save (MPS)

Answer 1

In the multiplier formula, c denotes the Marginal Propensity to Consume (MPC) — the fraction of each extra unit of income spent on consumption. Since \[s = 1 - c\], the multiplier can equivalently be written as \[\frac{1}{s}\].