Answer:The marginal propensity to consume (MPC) is 0.65
The multiplier or k = 2.85714 rounded to 2.86
Explanation:
The MPC pertains to the fraction of additional disposable income that consumers choose to spend. It is used to gauge the consumption increase driven by rising income.
MPC can be calculated as follows,
MPC = Change in consumption / change in income
MPC = 0.65 / 1
MPC = 0.65
To derive the multiplier, we apply this formula,
Multiplier or k = 1 / (1 - MPC)
k = 1 / (1 - 0.65)
k = 2.85714 rounded to 2.86
I believe the answer is C, though I'm unsure.
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