In the context of macroeconomic equilibrium, what does an autonomous expenditure multiplier measure when the marginal propensity to save is equal to zero point two?

💡 Solution & Explanation

The multiplier is calculated as one divided by the marginal propensity to save, which yields one divided by zero point two resulting in five. This coefficient demonstrates that an initial injection of independent spending generates a total income expansion five times larger in the absence of leakages. The marginal propensity to consume plus the marginal propensity to save always equals one in simple Keynesian models.