In a simple macro model with demand-determined output, the simple multiplier is equal to 1/1-z), where z
Equals the
A) average propensity to spend.
B) average propensity not to spend.
C) level of autonomous expenditure.
D) marginal propensity to spend.
E) marginal propensity not to spend.

Question

Quizplus · Accepted Answer

The simple multiplier formula is 1/(1-z), where z represents the marginal propensity to spend. It measures how much of an increase in income will lead to an increase in consumption. Therefore, D is the best choice, as it represents the correct variable for the simple multiplier formula.

In a Simple Macro Model with Demand-Determined Output, the Simple