The multiplier in this economy is 2.0.
Disposable income last year was $450 billion, and consumption was $400 billion. Therefore, saving was:
$450 billion - $400 billion = $50 billion.
The MPC tells us that a $1 increase in disposable income leads to a $0.50 increase in consumption. Therefore, a $50 billion increase in disposable income will lead to a:
$50 billion * 0.50
= $25 billion increase in consumption.
The multiplier is
$50 billion / $25 billion
= 2.0
Consider a hypothetical economy in which the marginal propensity to consume (MPC) is 0.50. That is, if disposable income increases by $1, consumption increases by 50 cents. Suppose further that last year disposable income in the economy was $450 billion and consumption was $400 billion.