How is the multiplier determined in economic terms?

Multiple choice question for The National Economy. Select an option, then review the explanation below.

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1 minus the marginal propensity to consume (1 - MPC)The reciprocal of the marginal propensity to save (1 divided by MPS)The reciprocal of the marginal propensity to consume (1 divided by MPC)Either option A or option B

Explanation

The multiplier can be calculated using either 1 minus the marginal propensity to consume (1 - MPC) or the reciprocal of the marginal propensity to save (1/MPS). Both methods yield the multiplier value, making options A and B correct.

Practice related questions from the same subject.

1.How does leakage through imports in an open economy affect the multiplier's magnitude?
2.Which components determine the overall multiplier effect in an economy?
3.With fixed government expenditure and tax rates, during which economic phases does the government budget deficit increase and during which does it decrease?
4.What is the likely effect on economic output if the government raises taxes to fully cover an increase in its spending?
5.When households attempt to increase their savings, but equilibrium income shifts without any change in total savings, what economic concept does this illustrate?

How is the multiplier determined in economic terms?

Explanation

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