Increases in the marginal propensity to consume (MPC),other things constant,_____.
A)increase the value of the multiplier
B)decrease the value of the multiplier
C)increase the marginal propensity to save
D)shift the aggregate expenditure curve downward
E)cause a downward movement along the aggregate expenditure curve

Question

Quizplus · Accepted Answer

An increase in MPC means that for every additional dollar of income, consumers will spend more, which in turn leads to a larger increase in aggregate expenditure. This increase in expenditure results in a larger multiplier effect, as each dollar of spending creates a larger chain reaction of additional spending in the economy. Therefore, an increase in MPC increases the value of the multiplier.

Increases in the Marginal Propensity to Consume (MPC),other Things Constant,_____