Find multiplier if: (a) MPC=0.5 (b) 75% of increased income is consumed.

Explanation

`(a) K=(1)/(1-MPC)`
`=(1)/(1-0.5)`
`therefore K=(1)/(0.5)=2`
(b) `(b) K=(1)/(1-MPC)`
`=(1)/(1-0.75)`
`thereforeK=(1)/(0.25)=4 (MPC=0.75 as 75% of increased income is spent on consumption)