AP Macroeconomics Flashcards: Multipliers
Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026
Review key ideas with interactive flashcards. This set includes 14 cards to help you master important concepts.
If the MPC is 0.9, what is the MPS?
The MPS is 0.1, because the sum of the MPC and MPS must equal one (1 - 0.9 = 0.1).
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If the MPC is 0.9, what is the MPS?
The MPS is 0.1, because the sum of the MPC and MPS must equal one (1 - 0.9 = 0.1).
If the government increases spending by $50 billion, will the final change in real GDP be more than, less than, or equal to $50 billion?
The final change in real GDP will be more than $50 billion because of the expenditure multiplier effect.
What is the economic significance of the multiplier effect?
The multiplier effect explains how initial changes in spending (from consumers, firms, or government) or taxes can lead to much larger changes in the overall real GDP.
What is the expenditure multiplier?
The expenditure multiplier quantifies the size of the change in aggregate demand that results from a change in any of the components of aggregate demand.
What key factor determines the size of both the expenditure and tax multipliers?
The size of both the expenditure multiplier and the tax multiplier depends on the marginal propensity to consume (MPC).
What is the tax multiplier?
The tax multiplier quantifies the size of the change in aggregate demand as a result of a change in taxes.
Define Marginal Propensity to Consume (MPC).
The marginal propensity to consume is the change in consumer spending divided by the change in disposable income.
If disposable income increases by $1,000 and consumer spending increases by $750, what is the MPC?
The MPC is 0.75, calculated by dividing the change in spending ($750) by the change in disposable income ($1,000).
How does an initial change in autonomous expenditures affect total output?
A $1 change to autonomous expenditures leads to a chain reaction of further changes in total expenditures and total output, resulting in a larger overall impact.
Explain the basic process of how a change in spending leads to a larger change in real GDP.
An initial change in spending becomes income for others, who then spend a portion of it, creating a ripple effect of spending and income that magnifies the initial change.
Define Marginal Propensity to Save (MPS).
The marginal propensity to save is the portion of an additional dollar of disposable income that is saved. The sum of the MPC and MPS equals one.
How is the Marginal Propensity to Consume (MPC) calculated?
To calculate MPC, you divide the change in consumer spending by the corresponding change in disposable income.
Why does a change in taxes have a smaller initial impact on aggregate demand than an equal-sized change in government spending?
A change in taxes first affects disposable income, and only a portion (determined by the MPC) is spent, whereas a change in government spending directly impacts aggregate demand in its entirety.
What is the relationship between the Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS)?
The sum of the marginal propensity to consume and the marginal propensity to save is equal to one (MPC + MPS = 1).