Suppose the marginal propensity to save is 1/8.What is the value of the simple multiplier?
A) 8
B) 4
C) 1/2
D) 1/8

Name: Suppose the marginal propensity to save is 1/8.What is the value of the simple multiplier? A) 8 B) 4 C) 1/2 D) 1/8
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Question

Suppose the marginal propensity to save is 1/8.What is the value of the simple multiplier?  
A) 8 
B) 4 
C) 1/2 
D) 1/8

Quizplus · Accepted Answer

The simple multiplier is calculated as 1/(1 - marginal propensity to consume). Given the marginal propensity to save is 1/8, the marginal propensity to consume is 7/8. Therefore, the multiplier is 1/(1 - 7/8) = 1/(1/8) = 8.

Suppose the Marginal Propensity to Save Is 1/8