In order to simplify the equation for the multiplier to its familiar,relatively simple form,we make use of the
A)assumption that increases in government purchases have no effect on consumer spending.
B)assumption that the feedback effects associated with changes in government purchases become negligible after two or three rounds of spending have occurred.
C)empirical evidence that points to a value of about 3/4 for the MPC.
D)fact that the multiplier effect is represented by an infinite geometric series.

Question

Quizplus · Accepted Answer

The fact that the multiplier effect is represented by an infinite geometric series allows us to simplify the equation for the multiplier into a relatively simple form that involves only the MPC. This is commonly known as the "simplified multiplier formula." The other assumptions or empirical evidence listed may be used in certain contexts, but they are not necessary for simplifying the multiplier equation.

In Order to Simplify the Equation for the Multiplier to Its