If the government decides to change the level of government spending, what happens to the value of the multiplier?
A)It becomes larger.
B)It becomes smaller.
C)It does not change.
D)It is impossible to predict.

Question

Quizplus · Accepted Answer

The value of the multiplier is determined by the marginal propensity to consume and save, not directly by the level of government spending. Therefore, a change in government spending does not alter the value of the multiplier itself.

If the Government Decides to Change the Level of Government