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Given that Y= C+I and C=bY, where b=0.8, what is the multiplier?

Given that Y= C+I and C=bY, where b=0.8, what is the multiplier?

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Answers (1)

Vek Tor
1 week ago
Y=C + I
C=bY where; b=0.8
C=0.8Y
Y=0.8Y + I

Change in Y/K=Change in Y - Change in C

Change in Y=Y
Change in C=C
K=Multiplier

Y/K=Y-C
Y/K=Y-0.8Y
Y/K=0.2Y
Y/K=0.2Y/1
cross multiply
Y=0.2KY
0.2KY=Y
Make K the subject of the formula
K=Y/0.2Y
K=1/0.2
K=5

Hence, the Multiplier is=5
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