The multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles is the:
A) Business cycle.
B) Multiplier.
C) Velocity of money.
D) GDP gap.

Question

Quizplus · Accepted Answer

The multiplier represents the multiple by which an initial change in aggregate spending will alter total expenditure after an infinite number of spending cycles. It is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. The other options are not related to the concept of the multiplier.

The Multiple by Which an Initial Change in Aggregate Spending