Which of the following would make the spending multiplier larger?

Question

Quizplus · Accepted Answer

The spending multiplier is equal to 1/(1-MPC), where MPC is the marginal propensity to consume. A smaller MPC means a larger multiplier. Therefore, a smaller marginal propensity to save (or a larger marginal propensity to consume) would make the spending multiplier larger. The other options are not directly related to the MPC and would not have as large an impact on the spending multiplier.

Which of the Following Would Make the Spending Multiplier Larger