Question

If MPC = 0.8, and increase in autonomous demand is 200, calculate multiplier and the national output.

Answer 1

MPC = b – c = 0.8 

Therefore multiplier is

\(\frac{1}{1-C} \,or\, \frac{1}{1-b}\)

I.e. \(\frac{1}{1-0.8} = \frac{1}{0.2}\)

= 5

National output is 5 x 200 = 1000