When the price level varies, the multiplier is _ the simple multiplier.
A)not comparable to
B)equal to
C)definitionally the same as
D)smaller than
E)larger than

Question

Quizplus · Accepted Answer

When the price level varies, the value of the simple multiplier becomes smaller. This is because an increase in price level causes a reduction in consumption and investment, which in turn reduces the overall impact of spending on the economy. Thus, the multiplier effect becomes smaller as the price level increases.

When the Price Level Varies, the Multiplier Is _ the Simple