2019 · Q57
In a closed economy with no taxes, if the marginal propensity to consume is always 0.90, then the value of the multiplier will be
indian-polity-economyeconomy-fundamentals
- A10.00
- B1.00
- C0.90
- D0.10
Explanation
The investment multiplier k = 1/(1 - MPC) = 1/(1 - 0.9) = 1/0.1 = 10. In a closed economy with no taxes this is the full multiplier, so the value is 10.00 - A. The stored key B has been corrected per UPSC's official answer key.