If the marginal propensity to consume is 0.9, then the spending multiplier is
A) 1.
B) 7.
C) 9.
D) 10.

Name: If the marginal propensity to consume is 0.9, then the spending multiplier is A) 1. B) 7. C) 9. D) 10.
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Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/(1-MPC) where MPC is the marginal propensity to consume. So, in this case, the spending multiplier would be 1/(1-0.9) = 10. Therefore, the correct answer is D.

If the Marginal Propensity to Consume Is 0