If Em is 5, then marginal propensity to consume is, Em is the expenditure multiplierGroup of answer choices10.50.20.8
Question
If Em is 5, then marginal propensity to consume is,
Em is the expenditure multiplier
Group of answer choices
- 10
- 0.5
- 0.2
- 0.8
Solution
The Marginal Propensity to Consume (MPC) can be calculated using the formula:
MPC = 1/(1 - expenditure multiplier)
Given that the expenditure multiplier (Em) is 5, we can substitute this value into the formula:
MPC = 1/(1 - 5)
This simplifies to:
MPC = 1/(-4)
So, the MPC is -0.25. However, MPC is usually expressed as a positive value between 0 and 1, so it seems there may be a mistake in the given value of the expenditure multiplier. Please check the value of Em.
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