Question

ln an economy the increase in income is 5times the increase in investment expenditure calculate the value of mpc​

Answer 1

Answer:

0.8

Explanation:

In an economy income rises due to rise in expenditure by multiplier times. The multiplier is calculated as

$m=\frac{1}{1-mpc}$

Here the rise in income is 5 times of rise in investment. Then the multiplier is 5.

Hence,

$\frac{1}{1-mpc} =5\\or,1-mpc=1/5\\or,1-mpc=0.2\\\therefore mpc=1-0.2=0.8$