The value of the output multiplier with an MPC of 0 75 and proportinal taxes of 0 20 20 is ........

Economics- Phase (I & II) Multiplier and Accelerator

The value of the output multiplier with an MPC of 0.75 and proportinal taxes of 0.20 (20%) is

2.5

3.33

None of the Above

K=1/1-MPC(1-Taxes)

K=1/1-MPC(1-0.2)

K=1/(1 - 0.75(1 - 0.2)),

K =1/(1 - 0.75 * 0.8) ,

K= 1/(1 - 0.6) = 2.5.

So, The value of the output multiplier is 2.5

Submit Error

error in calculation. Ans will be 5

Shubham Tiwari

It's correct try to solve it by applying BODMAS rule