Change in ange in Income Consumption change in Saving Assume

Change in ange in Income Consumption change in Saving Assumed Increase in Investment Second Round All Other Rounds Totals $5.00 $2.81 $8.44 $5.00 The table illustrates the multiplier process resulting from an autonomous increase in investment by $5. The multiplier in this economy is 02. 03 O 4. O 5.

Solution

Solution: 4

Working:

MPS = 1.25 /5 = 0.25

MPC = 0.75

Multiplier = 1 / MPS = 1 /0.25 = 4