The practical signiﬁcance of the multiplier is that it
A) equates the real interest rate and the expected rate of return on investment.
B) magniﬁes initial changes in spending into larger changes in GDP.
C) keeps inﬂation within tolerable limits.
D) helps to stabilize the economy.

Question

Quizplus · Accepted Answer

The multiplier magnifies initial changes in spending into larger changes in GDP, which can have a significant impact on economic growth and stability. The other options (equating real interest rate and expected rate of return on investment, keeping inflation within tolerable limits, and stabilizing the economy) are not specific to the practical significance of the multiplier.

The Practical Signiﬁcance of the Multiplier Is That It