As the marginal propensity to consume (MPC)decreases,the spending multiplier:
A)increases.
B)decreases.
C)remains constant.
D)becomes undefinable.
E)cannot be estimated.

Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/MPS (marginal propensity to save) or 1/(1-MPC). As MPC decreases, MPS increases, leading to a decrease in the spending multiplier. Therefore, option B is the correct answer.

As the Marginal Propensity to Consume (MPC)decreases,the Spending Multiplier