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

Multiple Choice

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

A) ∆Y* ÷ initial ∆AE where Y* = equilibrium real GDP by the ∆ = change in, AE = aggregate expenditures.
B) ∆AE ÷ ∆Y*.
C) ∆Y* * MPC where MPC = marginal propensity to consume.
D) 1 ÷ MPC.