The size of the expenditure multiplier is influenced by
i. the marginal propensity to consume.
ii. autonomous spending.
iii. the marginal tax rate.
A) i only
B) ii only
C) iii only
D) ii and iii
E) i and iii

Question

Quizplus · Accepted Answer

The size of the expenditure multiplier is influenced by the marginal propensity to consume because it determines how much of an additional dollar of income will be spent rather than saved, thereby affecting the multiplier's magnitude. The marginal tax rate also influences the multiplier because it affects disposable income and thus consumption. Autonomous spending, however, is not a determinant of the multiplier's size but rather an initial change that the multiplier acts upon.

The Size of the Expenditure Multiplier Is Influenced by