Question

Suppose that when your income increases by $200, your consumption expenditures increases by $150. Your marginal propensity to consume (MPC) is _____. If your MPC was the same as the MPC for the economy as a whole, the expenditure multiplier for the economy would be ____. Thus, a $1 million investment project would increase income by _____million in total.

Answer 1

Answer:

0,75, 1, 750.000

Explanation:

The formula is a change in consumption divided in change in income (150/200), if the whole economy has the same MPC that means the ratio of multiplier is 1 because there are not differences in the comsumption, so if the government invests 1 million in a project the income would be 0,75 million.