Answer:
option (1) 3
Explanation:
Data provided in the question:
Marginal propensity to consume, MPC = 0.75
Now,
Tax multiplier = 1 - [1 ÷ ( 1 - MPC ) ]
or
Tax multiplier = 1 - [ 1 ÷ ( 1 - 0.75 ) ]
or
Tax multiplier = 1 - 4
or
Tax multiplier = - 3
And,
Transfer payment multiplier = MPC ÷ [ 1 - MPC ]
or
Transfer payment multiplier = 0.75 ÷ [ 1 - 0.75 ]
or
Transfer payment multiplier = 0.75 ÷ 0.25
or
Transfer payment multiplier = 3
Hence,
Answer is option (1) 3
