Question

if the marginal propensity to consume out of current income is equal to 1/3 then the government purchase multiplier is equal to:group of answer choices1/3311.5

Answer 1

The government purchase multiplier can be calculated using the formula: G = 1 / (1 - MPC). In this case, the marginal propensity to consume is 1/3, so the government purchase multiplier is 3/2 or 1.5.

Step-by-step explanation:

The government purchase multiplier can be calculated using the formula:

G = 1 / (1 - MPC)

Where MPC is the marginal propensity to consume. In this case, the marginal propensity to consume is 1/3.

Substituting the value of MPC into the formula, we get:

G = 1 / (1 - 1/3)

Simplifying further:

G = 1 / (2/3)

G = 3/2

Therefore, the government purchase multiplier is 3/2 or 1.5.