If the marginal propensity to consume equals 0.75 the tax rate equals 0.25 and the marginal...

Question

Question

If the marginal propensity to consume equals

0.75

the tax rate equals

0.25

and the marginal propensity to import equals

0.10

what is the value of the government purchases multiplier?

business economics

Answer 1

Answer #1

Government Purchases multiplier=1/[1-c(1-t)]

c=MPC=.75

t=tax rate=.25

Government purchases multiplier=1/[1-.75(1-.25)]

Government purchases multiplier=1/.44=2.28

Answer 2

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