If the marginal propensity consumer (C) of an economy is 0.9, find out the value of the income multiplier.

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Latest Answer: 3 days ago
In: Commerce

If the marginal propensity consumer (C) of an economy is 0.9, find out the value of the income multiplier.

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Answered By Nikita Chetry
Answer: 3 days ago

What to find: The income multiplier given the marginal propensity to consume (MPC).Given: MPC = 0.9Formula: k=11−MPCk = \frac{1}{1 - \text{MPC}}k=1−MPC1 Steps: Substitute MPC into the formul...

What to find: The income multiplier given the marginal propensity to consume (MPC).

Given: MPC = 0.9

Formula:

$k = \frac{1}{1 - \text{MPC}}$

Steps:

Substitute MPC into the formula:

$k = \frac{1}{1 - 0.9}$

Calculate the denominator:

$1 - 0.9 = 0.1$

Calculate the multiplier:

$k = \frac{1}{0.1} = 10$

Answer: The income multiplier is 10.

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If the marginal propensity consumer (C) of an economy is 0.9, find out the value of the income multiplier.

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