If the marginal propensity to consume is 0.75, the multiplier for taxes and transfer payments is:1. 3

2. 4.

3. 0.25.

4. 0.75.

option (1) 3

Explanation:

Data provided in the question:

Marginal propensity to consume, MPC = 0.75

Now,

Tax multiplier = 1 - [1 : (1 - MPC) ]

or

Tax multiplier = 1 - [ 1 : (1 - 0.75) ]

or

Tax multiplier = 1 - 4

or

Tax multiplier = - 3

And,

Transfer payment multiplier = MPC : [ 1 - MPC ]

or

Transfer payment multiplier = 0.75 : [ 1 - 0.75 ]

or

Transfer payment multiplier = 0.75 : 0.25

or

Transfer payment multiplier = 3

Hence,

Answer is option (1) 3