Consider a simple macro model with a constant price level and demand-determined output.If the marginal propensity to spend in such a model is one,the simple multiplier is
A)zero.
B)a positive number between zero and one.
C)one.
D)a positive number greater than one but less than infinity.
E)infinitely large.

Question

Quizplus · Accepted Answer

When the marginal propensity to spend is one, any increase in spending leads to an infinite increase in output, making the multiplier infinitely large.

Consider a Simple Macro Model with a Constant Price Level