2.4.4 Multiplier

Question 1

The multiplier is a ratio but what is a ratio between?

Answer 1

between the input and output of an economy

Question 2

What is the MPS?

Answer 2

Marginal propensity to save

MPS = change in saving/change in income

Question 3

What is the MPC?

Answer 3

Marginal propensity to consume

MPC = change in consumption/change in income

Question 4

What is the MPM?

Answer 4

Marginal propensity to import

Question 5

What is the MPT?

Answer 5

marginal propensity to tax

Question 6

What is MPW?

Answer 6

marginal propensity to withdraw

MPW = MPS+MPT+MPM

Question 7

Give the two formulae for the multiplier

Answer 7

• multiplier = 1/MPW

- multiplier = 1/1-MPC