The expenditure multiplier equals
A) APC - APS where APC is the average propensity to consume and APS is the average propensity to save.
B) 1/(1 - slope of AE curve).
C) MPC - MPS where MPC is the marginal propensity to consume and MPS is the marginal propensity to consume.
D) 1/(slope of AE curve).

Question

Quizplus · Accepted Answer

The expenditure multiplier is correctly defined as 1/(1 - slope of AE curve), where AE stands for aggregate expenditure. This formula captures the multiplier effect of an initial change in spending leading to a larger overall impact on the economy.

The Expenditure Multiplier Equals