If the MPC = 0.8, what is the likely value of the Government expenditure multiplier for a standard national output (aggregate demand) function Y = C + I + G?

Correct option is C

The correct answer is: (c) 5.0
Explanation:
· The expenditure multiplier is given by the formula: Multiplier=$$\text{Multiplier} = \frac{1}{1 - \text{MPC}}$$​​
· Given MPC = $$\frac{1}{1 - 0.8} = \frac{1}{0.2} = 5$$​​
Information Booster:
· MPC: Marginal Propensity to Consume
· Higher MPC means higher multiplier effect.
· Multiplier measures change in output from change in government spending.
· Important in Keynesian economics for fiscal policy.
· Used in planning government stimulus and budget allocations.