Answer:
the simple multiplier is equal to 4
Step-by-step explanation:
In an economic model,
Y= C + I + G + (X - M)
the average expenditure Y must be equal to the totality of the output
If C = 3 + 0.75Y
where;
marginal propensity to consume MPC = 0.75
Then,
Y = 3 + 0.75Y + 2 + 1
Y = 6+0.75 Y
Y - 0.75 Y = 6
0.25 Y = 6
Y = 6/0.25
Y = 24
However, the simple multiplier can be expressed as:
[tex]=\dfrac{1}{1 - MPC}[/tex]
[tex]=\dfrac{1}{1 - 0.75}[/tex]
[tex]=\dfrac{1}{0.25}[/tex]
= 4
