Question

If the multiplier is 20 and income increases by​ $1000, then saving will increase by A....

If the multiplier is 20 and income increases by​ $1000, then saving will increase by

A.

​$80.

B.

​$200.

C.

​$1000.

D.

​$800.

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Answer #1

Answer:

The marginal propensity to consume (MPC) is equal to ΔC / ΔY, where ΔC is change in consumption, and ΔY is change in income.

It is given that, multiplier is 20 and income increases by $1000 .So, Y= $1000.

So, C/ Y = 20

Or, C = 20 * 1000 / 100 = 200

then saving will increase by 200

Correct option : B]$200

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