Generally speaking, the effect on income resulting from a change in investment spending is greater if

Question

Quizplus · Accepted Answer

DThe effect on income from a change in investment spending is greater when the marginal propensity to save (MPS) is smaller (C) because a smaller MPS implies a larger marginal propensity to consume (MPC), leading to a larger multiplier effect. Conversely, when the MPS is larger (D), it indicates a smaller MPC, which reduces the multiplier effect, but the question's phrasing suggests looking for conditions under which the effect on income is greater due to changes in investment spending. Thus, the correct interpretation focuses on the relationship between MPS, MPC, and the multiplier effect, where a smaller MPS (or equivalently, a larger MPC) results in a greater impact on income.

Generally Speaking, the Effect on Income Resulting from a Change