An increase in the marginal propensity to consume:

Question

Quizplus · Accepted Answer

An increase in the marginal propensity to consume leads to a higher multiplier effect as each additional dollar of income is more likely to be spent. Thus, choice A is correct. The autonomous investment line, which represents investments that are not affected by changes in income, is not directly affected by changes in the marginal propensity to consume. Therefore, choices B and D are incorrect. Choice C is also incorrect as an increase in the marginal propensity to consume leads to a higher multiplier, not a lower one.

An Increase in the Marginal Propensity to Consume