Multiplier can be described as

1. Analyze the question The question asks for the best description of the multiplier in macroeconomics.

2. Explain the concept The multiplier shows how much a change in autonomous spending (investment, government spending, exports and so on) changes total national income or output. This happens because one person's spending becomes another person's income, and part of that income is spent again, round after round.

Formula:

Multiplier (k) = ΔY / ΔA

where ΔY is the change in output (income) and ΔA is the change in autonomous spending.

In a simple economy, k = 1 / (1 − MPC) = 1 / MPS.

For example, if MPC = 0.8, then k = 1 / 0.2 = 5. A ₦100 million increase in investment then raises national income by ₦500 million.

3. Evaluate the options

• A. "Change in an endogenous variable to the change in spending" is too vague. It does not say which variable or which type of spending, so it is not precise.
• B. It adds "plus tax", which is not part of the definition. This is wrong.
• C. "Ratio of change in output to a change in autonomous spending" matches ΔY / ΔA exactly. This is correct.
• D. It is loosely worded and does not define the multiplier as a ratio of changes. It is not the best choice.

4. Answer The multiplier is the ratio of the change in output to the change in autonomous spending.

5. Exam tip Remember that the multiplier is "output change over autonomous spending change". When you see multiplier, think ΔY / ΔA and 1 / MPS. Be careful with options that add extras such as "tax" or that use vague wording.