The Multiplier Can Be Calculated by Dividing

question 198

Multiple Choice

The multiplier can be calculated by dividing

• A)the initial change in spending by the change in real GDP.
• B)the change in real GDP by the initial change in spending.
• C)one by one minus the marginal propensity to save.
• D)one by one minus the marginal propensity to invest.

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Definitions:

Debt-Equity Ratio

A financial proportion indicating the use of debt versus equity in the capital structure for asset financing.

Cost of Equity

The return that investors require or expect to earn on their investment in a company's equity to compensate for the risk they undertake.

After-Tax Cost

The after-tax cost is the net cost of a transaction, investment, or other financial activity after taking into account the effect of taxes.

Debt-Equity Ratio

Measures a company's financial leverage calculated by dividing its total liabilities by stockholders' equity.