If the marginal propensity to consume is 0.75, then the government-purchases multiplier is:0.25.0.75.4.4.75.
Question
If the marginal propensity to consume is 0.75, then the government-purchases multiplier is:0.25.0.75.4.4.75.
Solution
The government-purchases multiplier is calculated as 1/(1 - marginal propensity to consume).
Given that the marginal propensity to consume is 0.75, the government-purchases multiplier would be:
1 / (1 - 0.75) = 1 / 0.25 = 4.
So, the government-purchases multiplier is 4.
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