Choose the best possible answer for each multiple choice question Investment is unstable because unlike most consumption, it can be put off like most consumption, it can be put off unlike most consumption, it cannot be put off like most consumption, it cannot be put off a Consider the multiplier effect The relationship between changes in spending and changes in real GDP is an inverse relationship a direct relationship a neutral relationship an indirect relationship b When the multiplier is smaller, the MPC must be larger and the MPS smaller because the multiplier 1 (1 MPS) smaller, the MPC must be smaller and the MPS smaller because the multiplier 1 (1 MPC) larger, the MPC must be smaller and the MPS larger because the multiplier 1 (1 MPS) larger, the MPC must be larger and the MPS smaller because the multiplier 1 (1 MPC) c We see an increase in the multiplier when the MPC increases because a higher MPC implies that the initial change in spending will result in lower marginal consumption spending at each stage of the expansion process and in a smaller change in real GDP the final change in saving will result in greater consumption possibilities after each stage of the expansion process and in a smaller change in real GDP the initial change in spending will result in higher consumption spending at each stage of the expansion process and in a larger change in real GDP the final change in spending will result in higher saving after each stage of the expansion process and a larger change in real GDP The actual multiplier for the Canadian economy is smaller than the multiplier in this chapter's simple examples because it includes other leakages from the spending and income cycle besides just saving includes other leakages from the spending and income cycle besides just spending is calculated based on the average propensity to consume, not the marginal propensity to consume is corrected for inflation

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Choose the best possible answer for each multiple choice question.

Investment is unstable because

a.Consider the multiplier effect. The relationship between changes in spending and changes in real GDP is

b.When the multiplier is

smaller, the MPC must be larger and the MPS smaller because the multiplier = 1/ (1-MPS).
smaller, the MPC must be smaller and the MPS smaller because the multiplier = 1/(1-MPC).
larger, the MPC must be smaller and the MPS larger because the multiplier = 1/(1-MPS).
larger, the MPC must be larger and the MPS smaller because the multiplier = 1/ (1-MPC).

c.We see an increase in the multiplier when the MPC increases because a higher MPC implies that

the initial change in spending will result in lower marginal consumption spending at each stage of the expansion process and in a smaller change in real GDP
the final change in saving will result in greater consumption possibilities after each stage of the expansion process and in a smaller change in real GDP.
the initial change in spending will result in higher consumption spending at each stage of the expansion process and in a larger change in real GDP.
the final change in spending will result in higher saving after each stage of the expansion process and a larger change in real GDP.

The actual multiplier for the Canadian economy is smaller than the multiplier in this chapter's simple examples because it

includes other leakages from the spending and income cycle besides just saving.
includes other leakages from the spending and income cycle besides just spending.
is calculated based on the average propensity to consume, not the marginal propensity to consume.
is corrected for inflation.