The ratio of the change in GDP to an initial change in aggregate expenditures (AE) is the:
A) spending multiplier.
B) permanent income rate.
C) marginal expenditure rate.
D) marginal propensity to consume.

Question

Quizplus · Accepted Answer

The ratio of the change in GDP to an initial change in aggregate expenditures (AE) is the spending multiplier, which is represented by the equation: 1/(1-mpc), where mpc is the marginal propensity to consume.

The Ratio of the Change in GDP to an Initial