The multiplier is useful in determining the
A) full-employment unemployment rate.
B) level of business inventories.
C) change in the rate of inﬂation from a change in the interest rate.
D) change in GDP resulting from a change in spending.

Question

Quizplus · Accepted Answer

The multiplier is a measure of the amount by which GDP will increase in response to a given increase in spending. Specifically, it is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume (the fraction of additional income that is spent). Thus, the multiplier reflects the cumulative impact of a given change in spending on the overall level of economic activity.

The Multiplier Is Useful in Determining the