Question

If the government spending multiplier is found to be 2.5, what is the marginal propensity to consume?

• A. 0
• B. 0.4
• C. 0.6
• D. 1

Answer 1

The correct option is C

0.6

The multiplier is given by $\frac{1}{(1-c)}$. So, when c = 0.6, the multiplier is 2.5.