Which of the following equations defines the multiplier? A)1 - b B)1 - (c ÷ Y_D). C)1 ÷ (1 - MPC). D)1 ÷ APS.

Question

Quizplus · Accepted Answer

The multiplier is defined as the ratio of the change in output to the initial change in spending. The multiplier formula is ∆Y = k∆G, where k is the multiplier. Rearranging the formula, we get k = ∆Y/∆G. Using the formula for the simple spending multiplier, we get k = 1/(1 - MPC). Therefore, the answer is option C.

Which of the Following Equations Defines the Multiplier