Which of the Following Is a True Statement About the Multiplier

question 14

Multiple Choice

Which of the following is a true statement about the multiplier?

• A)The formula for the multiplier overstates the real world multiplier when we take into account the impact of changes in GDP on imports,inflation and the interest rate.
• B)The larger the MPC,the smaller the multiplier.
• C)The multiplier is the ratio of the change in spending to the change in GDP.
• D)The multiplier makes the economy less sensitive to changes in autonomous expenditure.

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Definitions:

Exchange Rate

The value at which one form of currency can be swapped for another, impacting overseas trade and investment activities.

Cross-Rate

The exchange rate between two currencies, calculated based on their common exchange rates with a third currency.

Exchange Rate

The rate at which one currency can be exchanged for another, determining how much of one currency is needed to purchase a unit of another currency.

Spot Trade

An agreement to trade currencies based on the exchange rate today for settlement in two days.