Consider a simple macro model with a constant price level and demand- determined output. If the marginal propensity to spend is 0.9, the simple multiplier is
A)0.1.
B)1.0.
C)0.9.
D)1.1.
E)10.0.

Question

Quizplus · Accepted Answer

The simple multiplier is calculated as 1/(1 - marginal propensity to spend). With a marginal propensity to spend of 0.9, the multiplier is 1/(1 - 0.9) = 10.0.

Consider a Simple Macro Model with a Constant Price Level