The sensitivity of GDP to changes in intended investment increases as the
A) marginal propensity to save declines.
B) multiplier declines.
C) slope of the consumption function declines.
D) change in equilibrium declines.
E) spending chain declines.

Question

Quizplus · Accepted Answer

When the marginal propensity to save declines, households are saving less and consuming more, which leads to an increase in aggregate demand and a greater impact of investment on GDP.

The Sensitivity of GDP to Changes in Intended Investment Increases