Which of the Following Is a True Statement About the Multiplier

question 14

Multiple Choice

Which of the following is a true statement about the multiplier?

• 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 smaller the multiplier.
• C)The multiplier is the ratio of the change in spending to the change in GDP.
• D)The multiplier makes the economy less sensitive to changes in autonomous expenditure.

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Definitions:

Fast Food Chains

A series of restaurants serving quick, easily prepared, and served food items, often through standardized menus and methods across multiple locations.

Long-run Equilibrium

A state in economics where supply equals demand, and all markets clear, resulting in an efficient allocation of resources over time.

Price

The financial cost or valuation of a goods or service, expressed as the amount of currency needed to acquire it.

Monopolistically Competitive Industry

A market structure where many firms sell products that are similar but not identical, allowing for significant differentiation and non-price competition.