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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

What is the relationship between the MPC and the multiplier?

To determine

The relationship between the MPC and the multiplier.

Explanation

A multiplier is the times by which a change in the investment or income or tax can have on the level of output in the economy. Thus, the process under which a change in the autonomous spending of an individual creating additional income to the another individual increases the autonomous spending of the second individual which in turn works to generate additional income to the third individual and so on is known as the multiplier process.

The multiplier value can be only obtained with the Marginal Propensity to Consume of the economy. The MPC is an important factor that determines the multiplier value...

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