Which of the following is a true statement about the multiplier?
A)The multiplier rises as the MPC rises.
B)The smaller the MPC, the larger the multiplier.
C)The multiplier is a value between zero and one.
D)The multiplier effect does not occur when autonomous expenditure decreases.
E)The multiplier only applies to government spending.

Question

Quizplus · Accepted Answer

The multiplier formula is 1/(1-MPC), where MPC is the marginal propensity to consume. As the MPC increases, the denominator in the formula decreases, resulting in a larger value for the multiplier. Therefore, as MPC rises, the multiplier also rises.

Which of the Following Is a True Statement About the Multiplier