What 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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1.333

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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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