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 _____.

A) 1 ÷ (1 - MPS) where MPS = marginal propensity to save
B) 1 ÷ MPC where MPC = marginal propensity to consume
C) 1 ÷ MPS where MPS = marginal propensity to save
D) MPC ÷ MPS ÷ ∆Y