Question

Find multiplier if (a) 50% of additional income is saved. (b) MPC=0.25

Answer 1

`(a) K=(1)/(1-MPS)`
`=(1)/(0.5)`
`Rightarrow K=2`
(b) `(b) K=(1)/(1-MPC)`
`=(1)/(1-0.25)`
`Rightarrow K=(1)/(0.75)=(4)/(3)=1.33`