AP Macroeconomics Practice Quiz: Multipliers

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 12 questions to check your progress.

Question 1 of 12

The marginal propensity to consume (MPC) is defined as the:

A)change in consumer spending divided by the change in disposable income.B)change in saving divided by the change in disposable income.C)total amount of consumer spending in an economy.D)sum of consumer spending and saving.

All Questions (12)

The marginal propensity to consume (MPC) is defined as the:

A) change in consumer spending divided by the change in disposable income.

B) change in saving divided by the change in disposable income.

C) total amount of consumer spending in an economy.

D) sum of consumer spending and saving.

Correct Answer: A

According to the provided content, 'The marginal propensity to consume is the change in consumer spending divided by the change in disposable income.'

If the marginal propensity to consume is 0.6, what is the marginal propensity to save (MPS)?

A) 0.6

B) 1.6

C) 0.4

D) 1.0

Correct Answer: C

The provided content states that 'The sum of the marginal propensity to consume and marginal propensity to save is equal to one.' Therefore, MPS = 1 - MPC = 1 - 0.6 = 0.4.

What is the primary purpose of the expenditure multiplier?

A) To calculate the marginal propensity to save.

B) To quantify the change in aggregate demand resulting from a change in autonomous spending.

C) To measure the change in tax revenue as income changes.

D) To determine the initial change in disposable income from a tax change.

Correct Answer: B

The content specifies that 'The expenditure multiplier quantifies the size of the change in aggregate demand as a result of a change in any of the components of aggregate demand,' which includes autonomous spending.

An initial $50 billion increase in autonomous investment spending leads to a total change in real GDP that is greater than $50 billion. This phenomenon is a direct result of the:

A) tax multiplier.

B) marginal propensity to save.

C) expenditure multiplier.

D) change in disposable income.

Correct Answer: C

The content explains that 'A $1 change to autonomous expenditures leads to further changes in total expenditures and total output.' The expenditure multiplier is the concept that quantifies this magnified effect on real GDP.

Assuming the marginal propensity to consume is 0.8, what is the maximum possible change in real GDP from a $100 billion increase in government spending?

A) An $80 billion increase

B) A $100 billion increase

C) A $400 billion increase

D) A $500 billion increase

Correct Answer: D

First, calculate the expenditure multiplier: Multiplier = 1 / (1 - MPC) = 1 / (1 - 0.8) = 1 / 0.2 = 5. Then, multiply the change in spending by the multiplier: $100 billion * 5 = $500 billion. This demonstrates the calculation of how changes in spending lead to changes in real GDP.

Which of the following best describes the function of the tax multiplier?

A) It is always equal to one.

B) It quantifies the change in aggregate demand resulting from a change in taxes.

C) It measures the change in the marginal propensity to consume.

D) It determines the change in government revenue when spending changes.

Correct Answer: B

This question directly tests the definition provided in the content: 'The tax multiplier quantifies the size of the change in aggregate demand as a result of a change in taxes.'

The magnitude of both the expenditure multiplier and the tax multiplier are determined by the:

A) level of government spending.

B) size of the initial tax change.

C) current level of real GDP.

D) marginal propensity to consume.

Correct Answer: D

The content explicitly states, 'The expenditure multiplier and tax multiplier depend on the marginal propensity to consume.' A higher MPC leads to larger multipliers.

If the marginal propensity to save is 0.25, what will be the effect on real GDP of a $200 billion decrease in lump-sum taxes?

A) A $600 billion increase

B) An $800 billion increase

C) A $600 billion decrease

D) A $200 billion increase

Correct Answer: A

First, find the MPC: MPC = 1 - MPS = 1 - 0.25 = 0.75. The tax multiplier is -MPC / MPS = -0.75 / 0.25 = -3. The change in GDP is the tax multiplier times the change in taxes: -3 * (-$200 billion) = +$600 billion. This calculation shows how a change in taxes leads to a change in real GDP.

Holding the marginal propensity to consume constant, a $1 billion increase in government spending will result in a larger change in real GDP than a $1 billion tax cut because:

A) the entire increase in government spending is initially spent, while only a fraction of the tax cut is initially spent.

B) tax cuts have a negative multiplier effect on the economy.

C) government spending is an injection while taxes are a leakage, and injections are always more powerful.

D) the tax multiplier is always greater than the expenditure multiplier.

Correct Answer: A

A change in government spending directly impacts aggregate demand. However, a tax cut increases disposable income, and consumers will save a portion (the MPS) of that increase. Only the portion that is consumed (the MPC) enters the spending stream initially, making the tax multiplier smaller in magnitude than the expenditure multiplier.

Suppose an economy has a marginal propensity to consume of 0.9. To close a recessionary gap of $400 billion, the government must increase its spending by:

A) $40 billion

B) $90 billion

C) $360 billion

D) $400 billion

Correct Answer: A

First, calculate the expenditure multiplier: Multiplier = 1 / (1 - MPC) = 1 / (1 - 0.9) = 1 / 0.1 = 10. The required change in GDP is +$400 billion. Using the formula ΔGDP = Multiplier * ΔSpending, we get $400 billion = 10 * ΔSpending. Solving for ΔSpending gives $40 billion.

The core idea that an initial change in autonomous expenditures leads to a larger final change in total output is known as the:

A) multiplier effect.

B) disposable income effect.

C) propensity to save effect.

D) taxation effect.

Correct Answer: A

The content states that 'A $1 change to autonomous expenditures leads to further changes in total expenditures and total output.' This process is quantified by the expenditure multiplier and is known as the multiplier effect.

If the government increases its spending by $50 billion and finances this by increasing lump-sum taxes by $50 billion, what will be the total change in real GDP?

A) Real GDP will increase by $50 billion.

B) Real GDP will decrease by $50 billion.

C) Real GDP will not change.

D) The change in real GDP cannot be determined without the MPC.

Correct Answer: A

This scenario describes the balanced budget multiplier, which is always equal to 1. The positive impact of the increased government spending is larger than the negative impact of the tax increase by a factor of one. The change in spending increases GDP by (1/MPS) * $50B, while the tax increase decreases GDP by (-MPC/MPS) * $50B. The net effect is ($50B/MPS) * (1 - MPC) = ($50B/MPS) * MPS = $50B.