If the marginal propensity to consume is 0.75, the simple expenditure multiplier is
Correct answer: C. 4
- A. 2
- B. 3
- C. 4
- D. 5
Explanation
The simple multiplier equals 1 divided by one minus the marginal propensity to consume. Thus, 1 divided by 0.25 equals 4, assuming no taxes, imports, or other leakages.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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