In a closed economy, the marginal propensity to consume is 0.6 and the average propensity to consume 0.8. The value of the multiplier is?

The multiplier is a measure of the change in national income that results from a change in autonomous expenditure (spending that is independent of income). The formula for the multiplier is: Multiplier = 1 / (1 - MPC) where MPC is the marginal propensity to consume. In this case, the MPC is 0.6, so we can plug this into the formula: Multiplier = 1 / (1 - 0.6) Multiplier = 1 / 0.4 Multiplier = 2.5 Therefore, the value of the multiplier is 2.5. The average propensity to consume (APC) is the fraction of income that is spent on consumption. It is calculated by dividing total consumption by total income. In this case, the APC is 0.8, which means that for every N1 earned, N0.80 is spent on consumption. In summary, the value of the multiplier is 2.5, which means that for every N1 increase in autonomous expenditure, national income will increase by N2.50. The APC is 0.8, which means that for every N1 earned, N0.80 is spent on consumption.