What is the significance of the multiplier? What causes the multiplier to be larger or smaller?
What will be an ideal response?
The multiplier is important because it means that a relatively small change in autonomous spending, such as investment spending or net exports, can have a much larger effect on total spending and real Gross Domestic Product (GDP). The greater the marginal propensity to consume (MPC), the greater the multiplier because more of a given increase in income is spent, raising the income of other people by more.
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The demand for food is most elastic in countries
A) with low income levels. B) with intermediate income levels. C) with high income levels. D) that are highly urbanized.
Increase in price of a good will increase consumers' demand. This is a(n)
A) positive statement. B) true statement. C) inverse statement. D) normative statement.