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

Question

Quizplus · Accepted Answer

The multiplier effect is inversely related to the marginal propensity to save (MPS) and directly related to the marginal propensity to consume (MPC). An increase in the MPC means that consumers are likely to spend a larger portion of any additional income, which amplifies the initial increase in spending through the economy, thereby increasing the size of the multiplier.

An Increase in the Size of the Multiplier Can Be