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If the marginal propensity to consume (MPC) in an economy is 0.75, what is the value of the Keynesian multiplier?

easy MCQ 1 mark Class 12 · Economics · Determination of Income and Employment

4
2
5
3

Answer

4

The correct answer is 4 — Take the reciprocal: $k = \frac{1}{0.25} = 4$ .

Step-by-step solution

Recall that the Keynesian multiplier (k) is given by $k = \frac{1}{1 - MPC}$ .
Substitute MPC = 0.75 into the formula: $k = \frac{1}{1 - 0.75}$ .
Compute the denominator: $1 - 0.75 = 0.25$ .
Take the reciprocal: $k = \frac{1}{0.25} = 4$ .

Common mistake: Using

\frac{1}{MPC}

instead of

\frac{1}{1 - MPC}

.

Concept tested: Multiplier effect

Published 28 September 2026 · How this solution was prepared and checked

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