Exhibit 9-9
-The larger the marginal propensity to save,other things constant,
A)the larger the marginal propensity to consume
B)the smaller the multiplier
C)the larger the multiplier
D)the steeper the consumption function
E)the flatter the saving function

Question

Exhibit 9-9 
-The larger the marginal propensity to save,other things constant,
A)the larger the marginal propensity to consume 
B)the smaller the multiplier 
C)the larger the multiplier 
D)the steeper the consumption function 
E)the flatter the saving function

Quizplus · Accepted Answer

The smaller the marginal propensity to consume (MPC), the larger the marginal propensity to save (MPS), according to the income-expenditure model. The multiplier is inversely proportional to MPS, therefore, the larger the MPS, the smaller the multiplier. Therefore, as MPS increases, the multiplier will decrease.

Exhibit 9-9 -The Larger the Marginal Propensity to Save,other Things Constant