The multiplier is deﬁned as
A) 1 − MPS.
B) change in GDP × initial change in spending.
C) change in GDP / initial change in spending.
D) change in GDP − initial change in spending.

Question

Quizplus · Accepted Answer

The multiplier is the ratio of the change in GDP to the initial change in spending. Mathematically, it is expressed as change in GDP / initial change in spending. Therefore, option C is the correct answer. Option A is incorrect as it is a formula for the marginal propensity to consume. Option B and D are also incorrect as they do not correctly represent the formula for the multiplier.

The Multiplier Is Deﬁned as