Which of the following affects the magnitude of the multiplier?
i.Marginal propensity to consume
ii.Marginal propensity to invest
iii.Marginal tax rate
A)i only
B)ii only
C)iii only
D)i and iii
E)i,ii and iii

Question

Quizplus · Accepted Answer

The magnitude of the multiplier is affected by the marginal propensity to consume (MPC) and the marginal tax rate (MTR). The higher the MPC or the lower the MTR, the higher the multiplier. The marginal propensity to invest (MPI) does not directly affect the multiplier, as it only affects the level of aggregate demand, not its multiplier effect. Therefore, option D, which includes i and iii, is the best choice.

Which of the Following Affects the Magnitude of the Multiplier