Question

The value of marginal propensity to consume is double the value of marginal propensity to save.
Find the value of multiplier.

Answer 1

Given : MPC = 2 MPS.

Since, MPC + MPS = 1

=> 2 MPS + MPS = 1

=> 3 MPS = 1

=> MPS = 1

=> MPC = 1 - MPS = 1 - ( 1/3 ) = 2/3

Multiplier(K) = 1/ (1- 2/3) = 1 / (3 - 2/ 3)

= 3/ 3- 2

= 3/1

= 3 times