Read the two statements and choose the correct option.
I. The multiplier works in both directions: a fall in investment lowers income by a multiple of the fall.
II. The value of the multiplier lies between 1 and infinity.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

A cut in spending lowers incomes round after round. I is true.
With MPC between 0 and 1, k = 1 ÷ (1 − MPC) is between 1 and infinity. II is true.

Ten questions from Income Determination & the Multiplier, at your own pace.

Ten questions from Income Determination & the Multiplier, at your own pace.

Read the two statements and choose the correct option.I. The multiplier works in both directions: a fall in investment lowers income by a multiple of the fall.II. The value of the multiplier lies between 1 and infinity.