All of the following are true statements about the multiplier except
A)The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports, inflation and the interest rate.
B)The larger the MPC, the larger the multiplier.
C)The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure.
D)The multiplier makes the economy less sensitive to changes in autonomous expenditure.
E)The multiplier applies to all changes in autonomous expenditure.

Question

Quizplus · Accepted Answer

The statement "The multiplier makes the economy less sensitive to changes in autonomous expenditure" is not a true statement about the multiplier. In fact, the multiplier makes the economy more sensitive to changes in autonomous expenditure, as it shows the resulting impact on GDP.

All of the Following Are True Statements About the Multiplier