Which of the following defines the government purchases multiplier?
A)MPC
B)1 - MPC
C)1/MPC
D)1/(1 - MPC)

Question

Quizplus · Accepted Answer

The government purchases multiplier is the inverse of the marginal propensity to save (MPS), which is the fraction of additional income that is saved rather than spent. Since MPS plus MPC equals 1, the government purchases multiplier can be calculated as 1/(1 - MPC), where MPC is the marginal propensity to consume.

Which of the Following Defines the Government Purchases Multiplier