If investment increases by $150 and, in response, equilibrium expenditure rises by $600,
A) the MPC is 4.
B) the multiplier is 0.25.
C) the slope of the AE curve is 3.0.
D) the multiplier is 4.0.

Question

Quizplus · Accepted Answer

The multiplier is calculated as the change in equilibrium expenditure divided by the initial change in investment. So, multiplier = ΔE/ΔI = 600/150 = 4.0.

If Investment Increases by $150 And, in Response, Equilibrium Expenditure