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19 August, 02:30

The marginal prospensity is to consume 0.75, marginal prospensity to invest is 0.3 and the marginal prospensity to import is 0.2. What is the size of the multiplier

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  1. 19 August, 03:01
    0
    1.33

    Explanation:

    The size of the multiplier is the one which grounded on the marginal decisions of the household for spend, that is called as the MPC (stands for Marginal Propensity to consume), also referred to as the marginal propensity to save (MPS).

    The formula to compute the size of the multiplier is as follows:

    Size of multiplier = 1 / MPS

    where

    MPS is 0.75

    So,

    Size of multiplier = 1 / 0.75

    = 1.33
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