Figure 3-7
-In figure above, the multiplier effect does not explain

Name: Figure 3-7 -In figure above, the multiplier effect does not explain
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Question

Figure 3-7 
-In figure above, the multiplier effect does not explain

Quizplus · Accepted Answer

The multiplier effect explains the increase in equilibrium income and induced saving, but it does not explain the increase in average propensity (AP). AP is a measure of how much of an increase in income is spent on consumption, and the multiplier effect only accounts for the initial increase in consumption that happens when income increases.

Figure 3-7 -In Figure Above, the Multiplier Effect Does Not Explain