What is the value of multiplier, when saving function is represented as: S = -60 + 0.2Y?
Understand the Problem
The question is related to concepts of macroeconomics, specifically focusing on topics such as aggregate demand, investment multipliers, and consumption functions, which are key to understanding national income and Keynesian economics.
Answer
5
The final answer is 5.
Answer for screen readers
The final answer is 5.
More Information
The multiplier effect measures how much economic activity increases in response to an increase in spending. In this case, the multiplier is 5, meaning every unit of additional spending generates five units of economic activity.
Tips
A common mistake is to confuse the MPS with the MPC when using the multiplier formula. Remember that MPS and MPC are complementary and their sum is always 1.
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