Consider a simple macro model with a constant price level and demand-determined output.In the extreme situation where the marginal propensity to spend is zero,the simple multiplier is
A)zero.
B)a positive number between zero and one.
C)one.
D)a positive number greater than one but less than infinity.
E)infinitely large.

Question

Quizplus · Accepted Answer

The simple multiplier is 1 when the marginal propensity to spend is zero, because any change in autonomous spending leads to an equal change in output, making the multiplier 1.

Consider a Simple Macro Model with a Constant Price Level