The simple multiplier:
A)occurs only in response to a change in the level of investment spending.
B)can be found by taking the reciprocal of the MPS.
C)occurs only when intended investment increases as GDP increases.
D)is measured by the slope of the saving schedule.

Question

Quizplus · Accepted Answer

The simple multiplier can be found by taking the reciprocal of the marginal propensity to save (MPS). This gives the amount by which a change in autonomous spending (such as investment) will change equilibrium output. The formula is 1/MPS, where MPS is a fraction between 0 and 1 that represents the proportion of income saved rather than spent. The simple multiplier is a theoretical concept that assumes all other factors are held constant, so it may not accurately predict the actual multiplier in a given situation.

The Simple Multiplier