An MPC equal to 0 implies a multiplier of 1, meaning that a $1 increase in autonomous

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An MPC equal to 0 implies a multiplier of 1, meaning that a $1 increase in autonomous expenditures would increase real GDP by only $1. Why does an MPC equal to 0 result in no multiplier effect? Conversely, an MPC equal to 1 implies an infinite multiplier, meaning that a $1 increase in autonomous expenditures would increase real GDP by an infinite amount. Why does an MPC of 1 result in an infinite multiplier? Explain your answers using the logic of the multiplier process.

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Economics

ISBN: 978-0134738321

7th edition

Authors: R. Glenn Hubbard, Anthony Patrick O Brien

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