In order to simplify the equation for the multiplier to its familiar, relatively simple form, we make use of the
A)assumption that increases in government purchases have no effect on consumer spending.
B)assumption that the feedback effects associated with changes in government purchases become negligible after two or three rounds of spending have occurred.
C)empirical evidence that points to a value of aboutfor the MPC.
D)fact that the multiplier effect is represented by an infinite geometric series.

Question

Quizplus · Accepted Answer

The fact that the multiplier effect is represented by an infinite geometric series allows us to simplify the equation for the multiplier to a relatively simple form. This is because the geometric series enables us to sum up an infinite number of terms using a finite formula, resulting in a manageable expression for the multiplier.

In Order to Simplify the Equation for the Multiplier to Its