An increase in the size of the multiplier can be caused by
A) a decrease in induced expenditures.
B) an increase in the MPS.
C) an increase in the MPC.
D) an increase in the marginal propensity to import.

Question

Quizplus · Accepted Answer

An increase in the marginal propensity to consume (MPC) will lead to a larger multiplier effect. This is because a higher MPC means that a larger proportion of each dollar earned is spent, rather than saved. As a result, an initial increase in spending will lead to a larger total increase in spending as each round of spending generates additional rounds of spending through the economy.

An Increase in the Size of the Multiplier Can Be