Question

if a $215 increase in investment spending creates $215 of new income in the first round of the multiplier process and $67 in the second round, what is the multiplier in this economy ?

Answer 1

The multiplier in this economy is 1.45.

Step-by-step explanation:

New income in the first round = $215

New income in the second round = $67

The difference = $215 - $67

=$148

The multiplier in this economy = 215/148

The multiplier = 1.45