If the marginal propensity to consume is 0.6. Then what will be the value of tax multiplier?
Answer & explanation
Correct answer: option 4
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