If the MPC equals.7 and the MPI equals .1 then the varible net export spending multiplier equals?
To calculate the variable net export spending multiplier, we need to use the formula:
Multiplier = 1 / (1 - MPC + (MPI * MPC))
Given:
MPC = 0.7
MPI = 0.1
Step-by-step calculation:
1. Substitute the given values into the formula:
Multiplier = 1 / (1 - 0.7 + (0.1 * 0.7))
2. Simplify the expression inside the parentheses:
Multiplier = 1 / (0.3 + 0.07)
3. Continue simplifying:
Multiplier = 1 / 0.37
4. Calculate the reciprocal of 0.37:
Multiplier ≈ 2.7027
Therefore, the variable net export spending multiplier is approximately 2.7027.