Given that Y = C + I and C = bY where b = 0.8, what is the multiplier?
The correct answer is A. 5
Given Y = C + I and C = bY where b = 0.8, to find the multiplier, we work through the formula as follows:
First, substitute C into the original equation:
Y = bY + I
This gives us:
Y - bY = I
Solving for \(Y\) yields:
Y(1 - b) = I
Which simplifies to:
\(Y = \frac{I}{1 - b}\)
The multiplier is the coefficient of \(I\) in this equation, which is \(\frac{1}{1 - b}\).
Substituting b = 0.8:
Multiplier = \(\frac{1}{1 - 0.8} = \frac{1}{0.2} = 5\)
So, the multiplier is 5.
Previous question Next questionWhat is Exam without Practice? With our customizable CBT practice tests, you’ll be well-prepared and ready to excel in your examsStart Practicing Now