calculate the multiplier for the following cases.\n|case|multiplier|\n|----|----|\n|mps = 0.25|4|\n|mpc =…
calculate the multiplier for the following cases.\n|case|multiplier|\n|----|----|\n|mps = 0.25|4|\n|mpc = 5/6| |
Answer
Explanation:
Step1: Recall the multiplier formula
The multiplier formula is $k=\frac{1}{1 - MPC}$ or $k=\frac{1}{MPS}$, where $k$ is the multiplier, $MPC$ is the marginal - propensity to consume and $MPS$ is the marginal - propensity to save.
Step2: Use the formula for the second case
Given $MPC=\frac{5}{6}$, we use the formula $k = \frac{1}{1 - MPC}$. Substitute $MPC=\frac{5}{6}$ into the formula: $k=\frac{1}{1-\frac{5}{6}}$ $=\frac{1}{\frac{6 - 5}{6}}$ $=\frac{1}{\frac{1}{6}}$ $=6$
Answer:
6