Homework Answers
c) Multiplier = 1/ (1- MPC)
So, we can write that
1/(1 - MPC) = 3
or, 1 - MPC = 1/3
or, MPC = 2/ 3 = 0.67 (rounded to two decimal places)
We can also calculate the MPC from the slope of the AE curve.
Slope of both the AE curves are same as they are parallel to each other.
Let us consider AE1 curve, at initial equilibrium point, slope = (23000-21000)/(23000-20000) = 2000/3000 = 2/3
Hence, MPC = 2/3 = 0.67(rounded to two decimal places)
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