An increase in the value of the multiplier can be caused by
A) an increase in autonomous consumption expenditure.
B) a decrease in the marginal propensity to consume.
C) an increase in the marginal propensity to import.
D) an increase in the marginal propensity to consume.

Question

Quizplus · Accepted Answer

The multiplier is directly affected by the marginal propensity to consume (MPC), which is the proportion of additional income that is spent on consumption. The higher the MPC, the larger the multiplier. Therefore, an increase in the MPC (choice D) will cause an increase in the value of the multiplier. The other choices (A, B, and C) either have no effect or a negative effect on the multiplier.

An Increase in the Value of the Multiplier Can Be