use the consumption function below to derive the multiplier in the y = c + i + g + x model.\nc = 100 +…

use the consumption function below to derive the multiplier in the y = c + i + g + x model.\nc = 100 + 0.60(y_d).\nthe multiplier is 2.50. (round your answer to two decimal places)\nnow suppose the consumption function changes to:\nc = 100 + 0.80(y_d).\nthe multiplier is

use the consumption function below to derive the multiplier in the y = c + i + g + x model.\nc = 100 + 0.60(y_d).\nthe multiplier is 2.50. (round your answer to two decimal places)\nnow suppose the consumption function changes to:\nc = 100 + 0.80(y_d).\nthe multiplier is

Answer

Explanation:

Step1: Recall the multiplier formula

The multiplier ($k$) in the $Y = C+I + G+X$ model when $C=a + bY_d$ is given by $k=\frac{1}{1 - b}$, where $b$ is the marginal - propensity to consume (MPC).

Step2: Identify the MPC

In the new consumption function $C = 100+0.80Y_d$, the value of $b = 0.80$.

Step3: Calculate the multiplier

Substitute $b = 0.80$ into the multiplier formula $k=\frac{1}{1 - b}$. So, $k=\frac{1}{1 - 0.80}=\frac{1}{0.20}=5.00$.

Answer:

5.00