If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals
A) 4.0.
B) 1.0
C) 0.8.
D) 5.0.

Name: If the marginal propensity to consume is 0.8 and there no income taxes or imports, the multiplier for a change in autonomous expenditure equals A) 4.0. B) 1.0 C) 0.8. D) 5.0.
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Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC). With an MPC of 0.8, the multiplier is 1/(1-0.8) = 1/0.2 = 5.0.

If the Marginal Propensity to Consume Is 0