Consider a simple macro model with demand-determined output.In such a model,the larger the marginal propensity to spend,the
A)larger the MPC.
B)smaller the MPS.
C)smaller the simple multiplier.
D)larger the simple multiplier.
E)greater is investment.

Question

Quizplus · Accepted Answer

In a demand-determined output model, the larger the marginal propensity to spend (MPS), the larger the simple multiplier. This is because a larger MPS means that a given change in autonomous spending (such as investment or government spending) will result in a larger change in total output. Therefore, the correct answer is (D) larger the simple multiplier.

Consider a Simple Macro Model with Demand-Determined Output