If the marginal propensity to consume is 0.6 and consumption expenditure changes by N10 million, the equilibrium level of income will change by

colikstan

3 years ago

Please you are all wrong in explanation it has nothing to do with multiplier
1-0.6= 0.4 which is the MPS
10,000,000÷0.4= 25,000,000
It's only when you are asked to find multiplier that you use K=1/1-mpc

Ade9

9 years ago

Yh.. .d answer is correct.. ..

(1-1/mpc)xchanges...

1-1/0.6x10m=#25.0m

lore.olabi

7 years ago

egbami

xplrscafe

2 months ago

yes right

lore.olabi

7 years ago

how????

kenny_008

1 year ago

Using the Keynesian Multiplier Formula
Multiplier K = 1/(1-MPC)

Step 1: Find the Multiplier (MPC = 0.6)
So K = 1/(1-0.6) = 5/2 or 2.5

Step 2: Use the multiplier to find the change in income
= 2.5*10million
=25million