How Does the Multiplier Change When the MPC Increases, and What

question 45

Multiple Choice

How does the multiplier change when the MPC increases, and what is the effect on aggregate demand?

• A) Higher MPC increases the multiplier so that changes in government expenditures have a larger effect on aggregate demand.
• B) Higher MPC increases the multiplier so that changes in government expenditures have a smaller effect on aggregate demand.
• C) Higher MPC decreases the multiplier so that changes in government expenditures have a larger effect on aggregate demand.
• D) Higher MPC decreases the multiplier so that changes in government expenditures have a smaller effect on aggregate demand.

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Definitions:

Saccharin

An artificial sweetener used as a sugar substitute, known for its zero-calorie content but with a somewhat bitter aftertaste.

Aspartame

Aspartame is an artificial, non-saccharide sweetener used as a sugar substitute in many foods and beverages.

Tea Harvest

The process of collecting the mature leaves from tea plants, typically occurring seasonally, which impacts the supply of tea in the market.

Equilibrium Price

The price at which the quantity of a good or service demanded equals the quantity supplied, leading to market stability.