The simple 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 simple multiplier is defined as the ratio of the change in GDP to the initial change in spending. Therefore, the correct formula for the simple multiplier is ΔGDP/ΔSpending. Choice C is the only option that reflects this definition.

The Simple Multiplier Is Defined As