Asked by Jonathan Gibbons on May 31, 2024
Verified
If the marginal propensity to consume is 6/7, then the multiplier is 7.
Marginal Propensity
The portion of additional income that an individual spends on consuming goods and services, as opposed to saving.
Multiplier
An economic factor that quantifies the impact of a change in investment, government spending, or other economic variables on the overall economy, often leading to a multiple increase in income or output.
- Gain insight into the multiplier effect and its consequences on aggregate demand.
Verified Answer
ZK
Zybrea KnightJun 04, 2024
Final Answer :
True
Explanation :
The multiplier is calculated as 1/(1 - marginal propensity to consume), so if the marginal propensity to consume is 6/7, the multiplier is 1/(1 - 6/7) = 7.
Learning Objectives
- Gain insight into the multiplier effect and its consequences on aggregate demand.