The Open-Economy Multiplier Is Equal to the Reciprocal of the Marginal

question 41

True/False

The open-economy multiplier is equal to the reciprocal of the marginal propensity to save.

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Definitions:

Equity Multiplier

A financial leverage ratio that measures the portion of a company’s assets that are financed by its shareholders' equity.

Quick Ratio

A liquidity metric that measures a company's ability to meet its short-term obligations with its most liquid assets.

Debt-Equity Ratio

The ratio showing the blend of debt and equity financing in a company’s strategy for asset accumulation.

Common-Base Year Value

A financial analysis technique in which all figures are expressed in relation to a certain base year, allowing for comparison over time by setting a common reference point.