If investment increases by $150 and, in response, equilibrium expenditure rises by $600
A) the multiplier is 0.25.
B) the multiplier is 4.0.
C) the MPC is 4.
D) the slope of the AE curve is 3.0.

Question

Quizplus · Accepted Answer

The multiplier is calculated as the ratio of the change in equilibrium expenditure to the change in investment, which is $600 / $150 = 4.0. This means that for every dollar increase in investment, total expenditure increases by four dollars, indicating the multiplier is 4.0.

If Investment Increases by $150 And, in Response, Equilibrium Expenditure