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Question

Economics Question on RBI

The maximum value of Fiscal policy multiplier is________.
(b implies sensitivity of planned investment spending to interest rate, c implies marginal property to consume, t is marginal tax rate, k refers to sensitivity of money demand to interest rate)

A

1k\frac{1}{k}

B

11−c(1−t)\frac{1}{1-c(1-t)}

C

1b\frac{1}{b}

D

b1−c(1−t)\frac{b}{1-c(1-t)}

Answer

11−c(1−t)\frac{1}{1-c(1-t)}

Explanation

Solution

The correct option is(B): 11−c(1−t)\frac{1}{1-c(1-t)}