ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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If the MPC is .6, the multiplier will be:
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4
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6
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2.5
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1.67
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Explanation:
Detailed explanation-1: -Therefore, the investment multiplier is 2.5.
Detailed explanation-2: -MPC = 1; multiplier = infinity; MPC = . 9, multiplier = 10; MPC = . 67; multiplier = 3; MPC = . 5, multiplier = 2; MPC = 0, multiplier = 1.
Detailed explanation-3: -If the MPC is 0.75, the Keynesian government spending multiplier will be 4/3; that is, an increase of $ 300 billion in government spending will lead to an increase in GDP of $ 400 billion. The multiplier is 1 / (1-MPC) = 1 / MPS = 1 /0.25 = 4.
Detailed explanation-4: -Therefore, when MPS is 0, 0.4, 0.6, and 1, the multiplier value is not defined, 2.5, 1.67, and 1, respectively.
Detailed explanation-5: -Multiplier(k) = 1/ (1-MPC) = 1/(1-0.8) = 1/0.2= 5.
There is 1 question to complete.