The ratio of the change in equilibrium real GDP to the change in autonomous aggregate expenditures that produced it is the:
A) multiplier.
B) current income.
C) permanent income.
D) marginal propensity to consume.

Question

Quizplus · Accepted Answer

This is referring to the spending multiplier, which measures the amount by which equilibrium GDP changes in response to a change in autonomous spending. The formula for the spending multiplier is 1/(1-MPC), where MPC is the marginal propensity to consume, so D is not the correct answer. Current income and permanent income are concepts related to consumption behavior, but not to the spending multiplier.

The Ratio of the Change in Equilibrium Real GDP to the Change