As the marginal propensity to consume increases, the value of the multiplier
A) stays the same.
B) increases.
C) decreases.
D) can increase or decrease.

Question

Quizplus · Accepted Answer

The value of the multiplier is equal to 1 divided by the marginal propensity to save (MPS). As the marginal propensity to consume (MPC) increases, the MPS decreases, which leads to a larger value of the multiplier. Therefore, the multiplier increases as the MPC increases.

As the Marginal Propensity to Consume Increases, the Value of the Multiplier