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or simplicity, let X=M G = 1 I = 2 if you like decimals C = 3 + 0.75Y or if you prefer fractions C = 3 + 3/4Y the simple multiplier is equal to

Respuesta :

ajeigbeibraheem

Answer:

the simple multiplier is equal to 4

Step-by-step explanation:

Given that:

Y=  C + I + G + (X - M)

the average expenditure Y must be equal  to the totality of the output

If C = 3 + 0.75Y  

here;

the  marginal propensity  consumed MPC = 0.75

Then,

Y = 3 + 0.75Y + 2 + 1

Y = 6+0.75 Y

Y - 0.75 Y = 6

0.25 Y = 6

Y = 6/0.25

Y = 24

However,  the simple multiplier can be expressed as:

[tex]= \dfrac{1}{1-MPC}[/tex]

[tex]= \dfrac{1}{1-0.75}[/tex]

= [tex]\dfrac{1}{0.25}[/tex]

= 4

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