The most important determinant of any multiplier in the Keynesian model is
A)the level of planned investment.
B)the level of unemployment.
C)the marginal propensity to consume.
D)the level of excess demand.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the most important determinant of any multiplier in the Keynesian model. MPC is the fraction of additional income that consumers will spend, and the higher the MPC, the higher the multiplier effect. This is because a higher MPC means that consumers will spend a larger proportion of any additional income received, which leads to a greater increase in aggregate demand and ultimately increases the multiplier effect. Therefore, any change in the MPC will have a direct impact on the size of the multiplier. The other options may also have an impact on the multiplier, but they are not as crucial as the MPC.

The Most Important Determinant of Any Multiplier in the Keynesian