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The Value of Multiplier Is: (Choose the Correct Alternative) - Economics

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The value of the multiplier is: (choose the correct alternative)

a. `1/"MPC"`

b. `1/"MPS"`

c. `1/(1-"MPS")`

d. `1/(MPC- 1)`

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Solution

`1/"MPS"`

Marginal Propensity to Save = 1 − Marginal Propensity to Consume
MPS = 1 − MPC

The value of the multiplier is:

`1/"MPS" or 1/(1 - "MPS")`

Where MPS is Marginal propensity to save
MPC is marginal propensity to consume

 

Concept: Investment Multiplier and Its Mechanism
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