Deriving the Multiplier Algebraically

16. Deriving the Aggregate Expenditures Model / Deriving the Multiplier Algebraically / Problem 1

Problem 1

Rearrange the equation Y = a + MPC * Y + I to solve for Y.

Y = (a + I) / (1 - MPC)

Y = a + I + MPC

Y = (a + I) * (1 - MPC)

Y = a + I - MPC