Answer the question on the basis of the following table that illustrates the multiplier process. Refer to the given table.The multiplier in this economy is:
A) 2.
B) 4.
C) 5.
D) 10.

Question

Answer the question on the basis of the following table that illustrates the multiplier process.  Refer to the given table.The multiplier in this economy is:
A) 2. 
B) 4. 
C) 5. 
D) 10.

Quizplus · Accepted Answer

The multiplier process can be calculated by the formula 1/(1-MPC), where MPC is the marginal propensity to consume. In this case, the MPC is 0.8 (given by the consumption column divided by the income column), so the multiplier is 1/(1-0.8) = 5. Therefore, choice C is the correct answer.

Answer the Question on the Basis of the Following Table