The formula for the multiplier is
A)1/(1 - MPS).
B)1/(1 - MPC).
C)1 - MPS.
D)1 - MPC.

Name: The formula for the multiplier is A)1/(1 - MPS). B)1/(1 - MPC). C)1 - MPS. D)1 - MPC.
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Question

Quizplus · Accepted Answer

The formula for the multiplier is 1/(1 - MPC), where MPC is the marginal propensity to consume. This formula shows the relationship between changes in consumption and changes in income. As consumption increases, so does income, and the multiplier measures this relationship. Therefore, the best choice is B.

The Formula for the Multiplier Is