Using the appropriate formulas, compute the simple Keynesian multipliers if the MPC = 50%, the MPS...

Using the appropriate formulas, compute the simple Keynesian multipliers if the MPC = 50%, the MPS = 20%, the MPC = 75%, and the MPS = 10%

Solutions

Expert Solution

Multiplier = 1/(1-MPC) = 1/MPS

A) if the MPC = 50%

MPC = 0.5

Multiplier = 1/(1-0.5) = 2

B) MPS = 20%

MPS = 0.2

Multiplier = 1/0.2 = 5

C) MPC = 75%

MPC = 0.75

Multiplier = 1/(1-0.75) = 4

D) MPS = 10%

Multiplier = 1/0.1 = 10

Rahul Sunny answered 2 years ago

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