CHAPETR 10 - CHAPETR 10 1 The multiplier effect means that...

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CHAPETR 10 1. The multiplier effect means that: A) consumption is typically several times as large as saving. B) a small change in consumption demand can cause a much larger increase in investment. C) a small increase in investment can cause national income to change by a larger amount. D) a small decline in the MPC can cause equilibrium GDP to rise by several times that amount. Ans: C 2. The multiplier may be calculated as: A) 1/(MPS + MPC) B) MPC/MPS C) 1/(1 - MPC) D) 1 - MPC = MPS Ans: C 3. If the MPS is only half as large as the MPC, the multiplier: A) is 2. B) is 3. C) is 4. D) cannot be determined from the information given. Ans: B 4. The multiplier effect: A) reduces the MPC. B) magnifies small changes in spending into larger changes in output and income. C) promotes stability of the general price level. D) lessens upswings and downswings in business activity. Ans: B 5. If the MPC is .6, the multiplier will be: A) 4.0. B) 6.0.
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This note was uploaded on 10/15/2009 for the course ECON 2302 taught by Professor Parker during the Spring '09 term at University of Texas-Tyler.

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CHAPETR 10 - CHAPETR 10 1 The multiplier effect means that...

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