In Order to Simplify the Equation for the Multiplier to Its

question 50

Multiple Choice

In order to simplify the equation for the multiplier to its familiar,relatively simple form,we make use of the

• A)assumption that increases in government purchases have no effect on consumer spending.
• B)assumption that the feedback effects associated with changes in government purchases become negligible after two or three rounds of spending have occurred.
• C)empirical evidence that points to a value of about \(3 / 4\) for the MPC.
• D)fact that the multiplier effect is represented by an infinite geometric series.

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Definitions:

Market Value

The present cost for acquiring or selling an asset or service in an open market.

LIFO Inventory

An inventory valuation method that assumes the last items placed in inventory are the first sold.

Market Value

The ongoing rate for purchasing or selling a good or service in the marketplace.

Inventory Valuation Method

A system used by businesses to assess the cost of their inventory, affecting financial statements and taxation.