The Value of the Multiplier Is

question 48

Multiple Choice

The value of the multiplier is

• A) negative at low income levels.
• B) the reciprocal of the marginal propensity to consume.
• C) increased as autonomous investment spending declines.
• D) never less than 1.
• E) difficult to calculate unless you know the change in equilibrium GDP.

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Definitions:

Variable Factor

An input whose quantity can change depending on the level of production or the scale of operations in the short run.

Production

The process of creating goods or services by combining labor, capital, and resources to meet consumer demands.

Market Wage

The prevailing rate of pay for labor in a particular job market, determined by the supply and demand for labor in that market.

Labor Supply

The total hours that workers are willing and able to work at a given wage rate in a given period of time.