Chapter 4 Part 2 - Income Determination and Multiplier
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Chapter 4 Part 2 - Income Determination and Multiplier
Last updated at April 16, 2024 by Teachoo
In an economy, the entire increase in income is spent on consumption. What will
be the value of multiplies?
View AnswerIt is given that the entire increase in income is spent on consumption
it means,
MPC = 1
K = 1/ 1 - MPC
K = 1/ 1-1
K = 1/ 0
K = not defined
So, the value of multiplier is not defined
No questions in this part
What can be the maximum value of Multiplier?
View AnswerThe maximum value of multiplier can be infinity.
What is Maximum Value of K? Max Value of K is Infinity Explanation We know that 1- MPC MPC Can be maximum 1 (We can spend all of what we earn) 1- MPC Infinity What is Minimum Value of K? Min Value of K is 1 Explanation We know that 1- MPC MPC Can be Min 0 (We can spend 0 of what we earn) 1- MPC K 1
