Assuming there is no government or foreign sector, [1 / 1-MPC] represents
A) the multiplier.
B) break even income.
C) the consumption function.
D) the saving function.

Question

Quizplus · Accepted Answer

1 / 1-MPC represents the multiplier, which is the number by which a change in autonomous spending (such as investment or government spending) is multiplied to determine the resulting change in gross domestic product (GDP). The formula for the multiplier is 1 / 1-MPC, where MPC is the marginal propensity to consume.

Assuming There Is No Government or Foreign Sector, [1