Question

For which of the following consumption functions, the value of income multiplier, k=5?

A C = 100 + 0.5Y Correct Answer Incorrect Answer
B C = 100 + 0.8Y Correct Answer Incorrect Answer
C C = 50 + 0.75Y Correct Answer Incorrect Answer
D C = 100 + 0.9Y Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Multiplier = 1/(1-MPC) = 1/(1-0.8) = 5.

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