Question

Given a consumption function C=1 000+0,4Y with a proportional income tax rate of 40%, what is the multiplier? Round off your answer to two digits after the decimal.

O d. 2,78

O c. 2,50

O b. 1,70

a. 1,32

Answer 1

$k=\frac 1{1-MPC}=\frac 1{MPS}=1.70.$