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Fact 11.3.1
An economy has a fixed price level, no imports, and no income taxes.MPC is 0.5 and real GDP is $200 billion.Businesses incr investment by $2 billion.
-Consider Fact 11.3.1.The multiplier is
A)2.0.
B)0.8.
C)0.5.
D)2.5.
E)0.75

Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. Given MPC is 0.5, the multiplier is 1/(1-0.5) = 2.0.

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