Other things constant, how would a larger marginal propensity to save affect the multiplier?
A) The multiplier would remain the same.
B) The multiplier would become smaller.
C) The multiplier would become larger.
D) The multiplier would be negative.

Question

Other things constant, how would a larger marginal propensity to save affect the multiplier?  
A) The multiplier would remain the same. 
B) The multiplier would become smaller. 
C) The multiplier would become larger. 
D) The multiplier would be negative.

Quizplus · Accepted Answer

A larger marginal propensity to save means that households and individuals are saving more of their income and spending less. This means there is less consumption spending in the economy, leading to a smaller increase in aggregate demand and a smaller multiplier effect. Therefore, a larger marginal propensity to save would result in a smaller multiplier.

Other Things Constant, How Would a Larger Marginal Propensity to Save