If the simple multiplier is 10,the marginal propensity to save is
A)1/10
B)9/10
C)1/9
D)10/9
E)9

Question

Quizplus · Accepted Answer

The simple multiplier is given by the equation: 1 / (1 - MPC), where MPC is the marginal propensity to consume. Since the simple multiplier is 10, we can set up the equation as 1 / (1 - MPC) = 10 and solve for MPC.

1 / (1 - MPC) = 10

Multiplying both sides by (1 - MPC):

1 = 10(1 - MPC)

1 = 10 - 10MPC

Simplifying:

10MPC = 9

MPC = 9/10

But the question asks for the marginal propensity to save, which is 1 - MPC. Therefore:

MPS = 1 - MPC = 1 - 9/10 = 1/10

So, the answer is A) 1/10.

If the Simple Multiplier Is 10,the Marginal Propensity to Save