In an economy, the aggregate demand function is given by $AD=80+ 0.75 Y$, What will be the value of investment multiplier?

4

The correct answer is Option (4) → 4

Multiplier (K)= 1 / (1 - MPC)

From the given aggregate demand function $AD=80+ 0.75 Y$, the MPC is the coefficient of Y.

Thus, MPC (Marginal Propensity to Consume) = 0.75

k =1 / (1 - 0.75 )

    = 1 / 0.25

    = 4