In a simple macro model with demand- determined output, the simple multiplier is equal to 1/(1- z), where z equals the
A)average propensity not to spend.
B)level of autonomous expenditure.
C)marginal propensity not to spend.
D)average propensity to spend.
E)marginal propensity to spend.

Question

Quizplus · Accepted Answer

The simple multiplier in a demand-determined output model is calculated as 1/(1 - z), where z represents the marginal propensity to spend. This is because the multiplier effect is based on the proportion of additional income that is spent on consumption.

In a Simple Macro Model with Demand- Determined Output, the Simple