The numerical value of the spending multiplier is smaller the:
A)larger the marginal propensity to consume
B)larger the marginal propensity to withdraw
C)greater the change in the price level that follows a spending change
D)greater the change in the interest rate in the economy
E)greater the change in government purchases in the economy

Question

Quizplus · Accepted Answer

The spending multiplier is inversely related to the marginal propensity to withdraw (which includes savings, taxes, and imports). The larger the marginal propensity to withdraw, the smaller the multiplier effect because less of each dollar spent is re-spent within the economy.

The Numerical Value of the Spending Multiplier Is Smaller The