**Question:**Assuming no government or foreign sector, if the MPC is 0.5, the multiplier is:**Options:**a. 5. b. 2. c. 0.5. d. 0.2.In this context, the question is asking about the multiplier effect in economics, which is calculated using the formula:\[ \text{Multiplier} = \frac{1}{1 - \text{MPC}} \]Given the MPC (Marginal Propensity to Consume) is 0.5, the multiplier would be calculated as follows:\[ \text{Multiplier} = \frac{1}{1 - 0.5} = \frac{1}{0.5} = 2 \]**Correct Answer:**b. 2.

Multiplier is depends upon the level consumption , which means depend upon the MPC , if the consumption is more so the level of Multiplier is high and vice versa , so here we calculate the Multiplier and choose the correct option which are as follow-b) 2. because As per the information given in the question, there is no government and foreign sector and marginal propensity to consume (MPC)= 0.5 Multiplier in a simple economy states to ratio of change in real GDP due change in injections, the formula for obtaining multiplier = 1/(1-MPC) Multiplier = 1/(1-MPC) Multiplier= 1/(1-0.5) Multiplier= 1/0.5 Multiplier= 2 so here , we conclude that when MPC is 0.5 , so level of Multiplier is 2 times hence , here only option b is correct as per calculations other options are incorrect!!!!!

Answered: Assuming no govemment or foreign…

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Assuming no govemment or foreign sector, if the MPC is 0.5, the multiplier is Select one: а. 5. b. 2. c. 0.5. 0.5. O d. 0.2.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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