Since the Value of the Multiplier Is Always at Least

question 114

Multiple Choice

Since the value of the multiplier is always at least 1,which of the following is correct?

• A) The size of the vertical shift in the aggregate expenditure line is always equal to the change in GDP
• B) The size of the vertical shift in the aggregate expenditure line is always less than the change in GDP
• C) The size of the vertical shift in the aggregate expenditure line is always greater than the change in GDP
• D) The size of the vertical shift in the aggregate expenditure line is always equal to or smaller than the change in GDP
• E) The MPC is always bigger than 1

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Definitions:

Economic Payoff

The financial return or profit resulting from an investment or action.

Bounded Rationality

The concept that when individuals make decisions, their rationality is limited by the information they have, the cognitive limitations of their minds, and the time available to make the decision.

Good Enough

A standard or condition that satisfies the basic requirements or criteria, without needing to be perfect.

Bounded Rationality

The concept that decision-making is limited by the information available, the cognitive limitations of individuals, and the finite amount of time they have to make a decision.