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In an economy, the entire increase in income is spent on consumption. What will be the value of multiplier? |
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Answer» Solution :When entire increase in income is spent on consumption, then: `DeltaC=DeltaY,i.e.MPC=1` We know: Multiplier (K)`=(1)/(1-MPC)` When MPC `=1,` then:k `=(1)/(1-1)=(1)/(0)=INFTY`(as any NUMBER DIVIDED by 0 is `infty`) |
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