If there are no taxes or imports and the marginal propensity to consume is 0.70, the multiplier is 3.33.
To calculate how much spending rises for every dollar of increased income, MPC monitors this connection. MPC is significant since it fluctuates with income and is lowest for those with higher incomes.
MPC is significant because it offers insightful information about how income affects consumer behavior. It aids economists and other specialists in learning about the relationship between an individual's income and their spending, which may affect economic policy.
The spending multiplier = 1 / (1 - MPC)
= 1 / (1 - 0.70)
= 3.33
To learn more about marginal propensity
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