If the marginal propensity to consume is

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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Government Budget and Economy

Question:

If the marginal propensity to consume is 0.6. Then what will be the value of tax multiplier?

Options:

+0.25

-0.25

+1.5

-1.5

Correct Answer:

-1.5

Explanation:

The correct answer is Option (4) → -1.5

Given: MPC (Marginal Propensity to Consume) = 0.6

Tax Multiplier= -MPC/ (1−MPC)

= - 0.6/(1 - 0.6)

= -0.6/0.4

= −1.5