Calculate the value of the multiplier from the given consumption function C = 100 + 0.8Y. Option 1: 5 Option 2: 2.5 Option 3: 1.25 Option 4: 2

Answer: 5. Solution: The multiplier is k = 1/(1-MPC). Here MPC = 0.8, so k = 1/(1-0.8) = 1/0.2 = 5.

Macro

Income & Employment

Easy

Calculate the value of the multiplier from the given consumption function C = 100 + 0.8Y.

2.5

1.25

✅ Correct Option: 1

The multiplier is $k = \dfrac{1}{1-MPC}$ . Here MPC = 0.8, so $k = \dfrac{1}{1-0.8} = \dfrac{1}{0.2} = 5$ .

2024: 16 May

Paradox of Thrift means :

2025: 30 May Shift 2

If all the people in the economy increase the proportion of income they save, the total value of savings in the economy will not increase – it will either decline or remain unchanged. This situation is known as...................

2025: 28 May Shift 1

The General Theory of Employment, Interest and Money was published in......... and by .............

2025, Adam Smith.
1935, John Maynard Keynes.
1936, John Maynard Keynes.
1932, David Ricardo.

2025: 30 May Shift 1

Arrange the following steps in the correct sequence to explain the working of Multiplier.

(A) Increase in income and consumption.

(B) Increase in investment.

(D) Generation of additional income.

Choose the correct answer from the options given below:

2025: 27 May Shift 2

Arrange the following statements about the effect of an increase in taxes on total income and output.

(A) An increase in taxes decreases disposable income.

(B) Aggregate demand schedule shifts downwards.

(D) Equilibrium output decreases.

2025: 3 June Shift 2

The function of the investment multiplier is?

Calculate the value of the multiplier from the given consumption function C = 100 + 0.8Y.

Solution

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