Question:
If Marginal Propensity to Consume (MPC) is \(0.8\), the value of investment multiplier will be:
If Marginal Propensity to Consume (MPC) is \(0.8\), the value of investment multiplier will be:
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Higher MPC \(\Rightarrow\) Higher Multiplier.
Updated On: Jun 3, 2026
- \(2\)
- \(4\)
- \(5\)
- \(10\)
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The Correct Option is C
Solution and Explanation
Concept:
Investment multiplier shows how much national income changes due to a change in investment.
\[
k = \frac{1}{1-MPC}
\]
Step 1: Substituting the value of MPC.
Given: \[ MPC = 0.8 \] \[ k = \frac{1}{1-0.8} \]
Step 2: Simplifying the expression.
\[ k = \frac{1}{0.2} \] \[ k = 5 \]
Step 3: Final conclusion.
Therefore: \[ \boxed{\text{(C) }5} \]
Step 1: Substituting the value of MPC.
Given: \[ MPC = 0.8 \] \[ k = \frac{1}{1-0.8} \]
Step 2: Simplifying the expression.
\[ k = \frac{1}{0.2} \] \[ k = 5 \]
Step 3: Final conclusion.
Therefore: \[ \boxed{\text{(C) }5} \]
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