The Multiplier Effect

Multiple Choice

The multiplier effect

A) tells us nothing about how increases in investment spending affect GDP
B) tells us that a change in investment spending changes equilibrium GDP by more than the change in investment
C) works only for increases in investment
D) is relevant only in situations where the marginal propensity to consume cannot be determined
E) is relevant only in situations in which the MPC is between 0.5 and 0.7.