If the MPS is only half as large as the MPC, the multiplier is
A) 2.
B) 3.
C) 4.
D) 5.

Question

Quizplus · Accepted Answer

The multiplier formula is 1/MPS or 1/(1-MPC). If MPS is half as large as MPC, then MPS = 0.5MPC. Substituting this into the multiplier formula, we get: 1/(0.5MPC) = 2/MPC. Therefore, the multiplier is 2 times the MPC. If the MPC is 1/3, then the multiplier is 2/3 or approximately 0.67. If the MPC is 0.2, then the multiplier is 2/0.2 or 10. Therefore, the best choice is B.

If the MPS Is Only Half as Large as the MPC