Let AE = Aggregate Expenditures, C = Consumption, I_P =

question 74

Multiple Choice

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment,
G =Government Purchases. Consider a simple aggregate expenditures model, where
AE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. If the MPS is 0.4, then the multiplier is

• A) 1.33
• B) 2.5
• C) 5
• D) 15

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Definitions:

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