is the value of the government spending multiplier if marginal propensity to consume is 0.6.

0.1333

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0.4

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1.33

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2.5

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Solution

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

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4

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