If the marginal propensity to consume (MPC) is 0.75, the value of the multiplier is

Question

a. 0.75.
b. 4.
c. 5.
d. 7.5.
e. none of the above.

Answer 1

The value of the multiplier (k) can be calculated using the formula:

\[ k = \frac{1}{1 - MPC} \]

Given that the marginal propensity to consume (MPC) is 0.75, we can substitute it into the formula:

\[ k = \frac{1}{1 - 0.75} \] \[ k = \frac{1}{0.25} \] \[ k = 4 \]

Therefore, the value of the multiplier is b. 4.