The investment expenditure of an economy changes by N2 million and MPC is 0.75. The multiplier is?

A. 8
B. 4
C. 3
D. 2

Correct Answer:

Option B = 4

Explanation

The Multiplier is calculated as ( 1 divided by 1 minus the MPC)

Multiplier = 1/1 – MPC

1/1 – 0.75
1 – 0.25 = 4