Question on: JAMB Economics - 2012
The investment expenditure of an economy changes by N 2 million and MPC is 0.75
The multiplier is
The multiplier is
A
8
B
4
C
3
D
2
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Correct Option: D
The multiplier effect in economics is calculated using the Marginal Propensity to Consume (MPC). The formula for the multiplier is:
Multiplier = 1 / (1 - MPC)
Given that MPC = 0.75:
1. Calculate (1 - MPC): 1 - 0.75 = 0.25
2. Calculate the Multiplier: 1 / 0.25 = 4
Therefore, the multiplier is 4.
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