Other things constant, how does an increase in the marginal propensity to consume affect the value of the multiplier?
A) It increases the value of the multiplier.
B) It decreases the value of the multiplier.
C) It makes the value of the multiplier positive.
D) It makes the value of the multiplier negative.

Question

Other things constant, how does an increase in the marginal propensity to consume affect the value of the multiplier?  
A) It increases the value of the multiplier. 
B) It decreases the value of the multiplier. 
C) It makes the value of the multiplier positive. 
D) It makes the value of the multiplier negative.

Quizplus · Accepted Answer

An increase in the marginal propensity to consume means that individuals are spending a larger proportion of their income, which leads to an increase in overall aggregate demand. This increased demand leads to a larger multiplier effect, which means that an initial increase in spending will lead to a larger increase in GDP. Therefore, an increase in the marginal propensity to consume increases the value of the multiplier.

Other Things Constant, How Does an Increase in the Marginal