The Use of 1/MPS Formula as the Size of the Multiplier

question 142

Multiple Choice

The use of 1/MPS formula as the size of the multiplier in the economy, overstates the actual size of it because:

• A)saving is not the only fraction of the domestic income which is not spent.
• B)saving is the only fraction of the domestic income which is not spent.
• C)imports and taxes create new income in the economy.
• D)imports and not taxes creates new income in the economy.

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