question_answer

The value of multiplier is: (choose the correct alternative)

(a) \[\frac{1}{MPC}\]                                         (b) \[\frac{1}{MPS}\]

(c) \[\frac{1}{1-MPS}\]                                      (d) \[\frac{1}{MPC-1}\]

Answer:

The value of multiplier is \[\frac{1}{MPS}\left( or\frac{1}{1-MPC} \right).\] Here, MPS refers to the Marginal propensity to save. \[MPS=1MPC\]