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If the multiplier is 4 and the investment function is: I=200. What is the value of the marginal propensity to consume?

Question

If the multiplier is 4 and the investment function is: I=200. What is the value of the marginal propensity to consume?

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Solution

The marginal propensity to consume (MPC) can be calculated using the formula:

MPC = 1 - (1/Multiplier)

Given that the multiplier is 4, we can substitute this value into the formula:

MPC = 1 - (1/4) = 1 - 0.25 = 0.75

So, the value of the marginal propensity to consume is 0.75.

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