### Question:If the marginal propensity to consume is $ \frac{1}{3} $, then the government spending multiplier is 3.- [x] True- [ ] False**Explanation:**The government spending multiplier can be calculated using the formula:\[ \text{Multiplier} = \frac{1}{1 - \text{MPC}} \]Where MPC is the marginal propensity to consume. Given that MPC is $ \frac{1}{3} $:\[ \text{Multiplier} = \frac{1}{1 - \frac{1}{3}} = \frac{1}{\frac{2}{3}} = \frac{3}{2} = 1.5 \]Therefore, the statement is false. The correct government spending multiplier is 1.5, not 3.

Income is split in two category - MPC and MPS either person consume or save and the level of multiplier depends upon the MPC , more the MPC , higher the Multiplier here we choose the correct option which are as follow-b) False , because Given- MPC = 1/3 or 0.33 as we know that , Multiplier = 1/1-MPC so here , Multiplier = 1/1-0.33 Multiplier = 1/ 0.67 Multiplier = 1.49 or 1.5 so here we conclude that , when MPC is 1/3 , multiplier is 1.5 times Hence here this statement is false because when MPC is 1/3 Multiplier is 1.5 times not 3 times so here this statement is false , so we choose option B

Answered: If the marginal propensity to consume…

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If the marginal propensity to consume is then the government spending multiplier is 3. True O False 1//3

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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