What is the calculation for the simplified spending multiplier?
A) 1/(1 − MPC)
B) −1/(1 − MPC)
C) −MPC/(1 − MPC)
D) (1 − MPC) × − MPC

Question

Quizplus · Accepted Answer

The simplified spending multiplier is calculated as 1/(1 − MPC), where MPC is the marginal propensity to consume. This formula represents the amount by which an initial injection of spending (such as government spending or investment) will increase total output in the economy. Therefore, the correct answer is A.

What Is the Calculation for the Simplified Spending Multiplier