In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

A) $60.25.
B) $60.75.
C) $61.33.
D) $64.00.

Question

Marseel Khames · Accepted Answer

Final Answer : B, Explanation :  The marginal propensity to consume (MPC) can be calculated using the multiplier formula: Multiplier = 1/(1-MPC). Given the multiplier is 4, MPC = 0.75. Therefore, when income increases by $1 (from $100 to $101), consumer spending increases by $0.75 (0.75 * $1), making it $60.75.

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

A) $60.25.
B) $60.75.
C) $61.33.
D) $64.00.

Definitions

Learning Objectives

Learning Objectives

Related questions

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending isA) $60.25.B) $60.75.C) $61.33.D) $64.00.

Definitions

Learning Objectives

Learning Objectives

Related questions

In a certain economy, when income is $100, consumer spending is $60. The value of the multiplier for this economy is 4. It follows that, when income is $101, consumer spending is

A) $60.25.
B) $60.75.
C) $61.33.
D) $64.00.