Question

Badluckville had been expecting a $50 million investment for a new golf resort, but the contract was cancelled.

Badluckville's mayor estimates that this will cost the city $300 million in total economic activity. What is the mayor's
estimate of the multiplier and marginal propensity to consume?

Answer 1

multiplier = 6

marginal propensity to consume = .83

Explanation:

/ means divided by

1 .

300,000,000 / 50,000,000 =

multiplier =

6

2.

300,000,000 - 50,000,000 =

250,000,000

250,000,000/300,000,000 =

marginal propensity to consume =

0.83333333333

or

.83

quizlet

marginal propensity to consume is equal to ΔC / ΔY, where ΔC is the change in consumption, and ΔY is the change in income

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