If the marginal propensity to consume is 0.7, the government-purchases multiplier is:0.3.0.7.1.4.3.3.
Question
If the marginal propensity to consume is 0.7, the government-purchases multiplier is:0.3.0.7.1.4.3.3.
Solution
The government-purchases multiplier is calculated as 1/(1 - marginal propensity to consume). In this case, the marginal propensity to consume is 0.7.
Step 1: Subtract the marginal propensity to consume from 1. 1 - 0.7 = 0.3
Step 2: Divide 1 by the result from step 1 to find the government-purchases multiplier. 1 / 0.3 = 3.33
So, the government-purchases multiplier is 3.33.
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