Suppose that a simple economy has a multiplier of 2. The investment function is I=40.What is the marginal propensity to consume?
Question
Solution 1
The marginal propensity to consume (MPC) can be calculated using the formula:
MPC = 1 - (1/Multiplier)
Given that the multiplier is 2, we can substitute this into the formula:
MPC = 1 - (1/2) = 0.5
So, the marginal propensity to consume in this economy is 0.5. Knowee AI StudyGPT is a powerful AI-powered study tool designed to help you to solve study problem. Knowee AI StudyGPT is a pow
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