The actual multiplier effect in the U. S. economy is less than the multiplier effect in the text examples because:
A)the real-world MPS is larger than the MPS in the examples.
B)in addition to saving, households use some of any increase in income to buy imported goods and to pay higher taxes.
C)the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts.
D)the MPC in the United States is greater than 1.
Answer:B
The actual multiplier effect in the U. S. economy is less than the multiplier effect in the text examples because:
A)the real-world MPS is larger than the MPS in the examples. B)in addition to saving, households use some of any increase in income to buy imported goods and to pay higher taxes. C)the gap between the nominal interest rate and the real interest rate widens as the economy expands or contracts. D)the MPC in the United States is greater than 1.