What is the formula for the simple spending multiplier?
A) 1/(1+MPC)
B) 1/(1-MPC)
C) 1/(MPC-1)
D) 1/MPC
E) (1-MPC)/(1+MPC)

Question

Quizplus · Accepted Answer

The formula for the simple spending multiplier is 1/(1-MPC), where MPC is the marginal propensity to consume. This formula represents the amount by which output (or spending) will change for each unit change in autonomous spending (such as government spending or investment). Therefore, choice B is the correct answer as it represents the correct formula for the simple spending multiplier.

What Is the Formula for the Simple Spending Multiplier