given that the mps in an economy is equal to 0.20, the multiplier is equal to . (round your answer to two…
given that the mps in an economy is equal to 0.20, the multiplier is equal to . (round your answer to two decimal places)
Answer
Explanation:
Step1: Recall the multiplier formula
The multiplier formula is $k=\frac{1}{MPS}$, where $k$ is the multiplier and $MPS$ is the marginal - propensity to save.
Step2: Substitute the given MPS value
Given $MPS = 0.20$, we substitute it into the formula: $k=\frac{1}{0.20}$.
Step3: Calculate the multiplier
$\frac{1}{0.20}=5.00$
Answer:
5.00