All of the Following Are True Statements About the Multiplier

question 301

Multiple Choice

All of the following are true statements about the multiplier except

• 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 larger the multiplier.
• C)The multiplier is the ratio of the change in real GDP to the change in autonomous expenditure.
• D)The multiplier makes the economy less sensitive to changes in autonomous expenditure.
• E)The multiplier applies to all changes in autonomous expenditure.

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Definitions:

Point Q

A hypothetical point used in economic models or graphs to represent a specific position in terms of quantity or quality.

Economy

A framework for creating, distributing, and utilizing goods and services in a specific geographic region.

Economic Growth

A boost in the purchasing power adjusted market value of goods and services an economy creates over time.

Long Run

A period in economics sufficient for all markets to adjust, including production facilities and labor.