Which of the following equations defines the multiplier? A)1 - b B)1 - (c ÷ Y_D). C)1 ÷ (1 - MPC). D)1 ÷ APS.

Name: Which of the following equations defines the multiplier? A)1 - b B)1 - (c ÷ Y D ). C)1 ÷ (1 - MPC). D)1 ÷ APS.
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Question

Quizplus · Accepted Answer

The multiplier is defined as the ratio of the change in real GDP to the initial change in spending. MPC (Marginal Propensity to Consume) represents the proportion of an increase in income which is spent. Therefore, 1 ÷ (1 - MPC) is the formula for the multiplier.

Which of the Following Equations Defines the Multiplier