Answer to Question #132809 in Microeconomics for Faheem ali Mirani

Question #132809
In a hypothetical economy, without taxes, the consumption(C) at different levels of real GDP (Y) is
given here under:
Real GDP Consumption (Rs in Billion)
(Y) (C)
3,000 1,500
5,000 3,000
Determine the size of MPC (Marginal propensity to consume), MPS (Marginal propensity to save) and multiplier
1
Expert's answer
2020-09-16T20:58:50-0400

MPC=ΔCΔY=3000150050003000=0.75MPC = \dfrac{ \Delta C} { \Delta Y} = \dfrac {3000-1500} {5000-3000} = 0.75

MPS=1MPC=10.75=0.25MPS = 1 - MPC = 1 - 0.75 = 0.25

Multiplier=11MPC=110.75=4Multiplier = {1 \above{1pt} 1- MPC} = {1 \above{1pt} 1- 0.75} = 4


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