Question
The spending multiplier indicates that:
changes in investment, government, or consumption spending trigger much larger changes in real GDP.
an autonomous increase in saving will cause output to rise by a multiple of the additional saving.
a market economy will be more stable than classical economists thought.
the marginal propensity to consume is greater than one.
changes in investment, government, or consumption spending trigger much larger changes in real GDP.
an autonomous increase in saving will cause output to rise by a multiple of the additional saving.
a market economy will be more stable than classical economists thought.
the marginal propensity to consume is greater than one.
Answers
GPT-5 mini
Answer: changes in investment, government, or consumption spending trigger much larger changes in real GDP.
Reason: The spending (Keynesian) multiplier k = 1/(1 − MPC) > 1 for 0 < MPC < 1, so an autonomous change in spending is amplified into a larger change in equilibrium GDP. The other choices are incorrect (MPC < 1, an autonomous rise in saving lowers output, and the multiplier itself doesn’t prove markets are more stable).
Reason: The spending (Keynesian) multiplier k = 1/(1 − MPC) > 1 for 0 < MPC < 1, so an autonomous change in spending is amplified into a larger change in equilibrium GDP. The other choices are incorrect (MPC < 1, an autonomous rise in saving lowers output, and the multiplier itself doesn’t prove markets are more stable).