The partial expenditure multiplier
A)equals the MPC.
B)is the ratio of total increase in demand for goods to the increase in government spending.
C)equals (1 - MPC).
D)is the total increase in government spending.
E)is the total increase in the demand for goods.

Question

Quizplus · Accepted Answer

The partial expenditure multiplier is defined as the ratio of the total increase in demand for goods to the increase in government spending. It measures the impact of government spending on the economy and is calculated as 1/MPS, where MPS is the marginal propensity to save. Therefore, it is not equal to the MPC (choice A) or (1-MPC) (choice C) which are measures of the proportion of additional income that is spent or saved, but rather a separate calculation based on the change in government spending. It is also not the total increase in government spending (choice D) or the total increase in demand for goods (choice E).

The Partial Expenditure Multiplier