The Multiplier

What is the multiplier effect in macroeconomics?

• An increase in final GDP arising from any new injection of spending

• A decrease in GDP due to increased taxes

• An increase in imports due to higher income

• A decrease in government spending

Tags

Understanding

Which of the following is NOT a component of the marginal propensity to withdraw (MPW)?

• Marginal propensity to consume (MPC)

• Marginal propensity to save (MPS)

• Marginal propensity to tax (MPT)

• Marginal propensity to import (MPM)

Tags

Analyzing

If the marginal propensity to consume (MPC) is 0.4, what is the value of the multiplier using the formula 1/(1-MPC)?

• 1.666

• 2.0

• 1.5

• 2.5

Tags

Applying

The formula for calculating the multiplier using withdrawals is 1 divided by the marginal propensity to ______.

Tags

Understanding

What happens to the multiplier effect if the marginal propensity to consume (MPC) increases?

• The value of the multiplier increases

• The value of the multiplier decreases

• The value of the multiplier remains the same

• The value of the multiplier becomes zero

Tags

Applying

Which of the following statements is true about the accelerator effect?

• An increase in national income results in a proportionately larger rise in investment

• A decrease in national income results in a proportionately larger rise in investment

• An increase in national income results in a proportionately larger decrease in investment

• A decrease in national income results in a proportionately larger decrease in investment

Tags

Understanding

The overall impact of the multiplier will depend upon the MPC, MPT, MPM, and ____.

Tags

Analyzing