Let AE = Aggregate Expenditures, C = Consumption, I_P =

Let AE = Aggregate Expenditures, C = Consumption, I_P = Planned Investment, JG = Government Purchases. Consider a simple aggregate expenditures model, where
JAE = C + I_P + G and all components of aggregate expenditures except consumption are autonomous. In this model, the multiplier is _____.

A) 1 ÷ (1 -MPS) where MPS = marginal propensity to save
B) 1 ÷ MPC where MPC = marginal propensity to consume
C) 1 ÷ MPS where MPS = marginal propensity to save
D) MPC ÷ MPS ÷ ∆Y

Correct Answer:

Verified

Unlock this answer now
Get Access to more Verified Answers free of charge

Access For Free