Question

Given each of the following values for the multiplier, calculate both the MPC and the MPS. a. 20 b. 10 c. 8 d. 5

Answer 1

Answer:

a)) MPS 0.05 MPC 0.95

b)) MPS 0.10  MPC 0.90

c)) MPS 0.20 MPC 0.80

Explanation:

the goverment spending multiplier is calcualted as follow:

$\frac{1}{1-MPC} =\frac{1}{MPS}$

if it is 20 then marignal propensivity to save:

1/20 = 0.05 and MPC will be 1 - MPS = 1 - 0.05 = 0.05

b) if 10 then 1/10 = MPS = 0.1 and 1-0.1 = 0.9 = MPC

if the multiplier is 5 then:

1 / 5 = 0.2 = MPS

and marginal propensivity to consume:

1 - 0.2 = 0.8