If the marginal propensity to save (MPS) is 0.50, the value of the spending multiplier is:
A) 1.
B) 2.
C) 4.
D) 9.

Name: If the marginal propensity to save (MPS) is 0.50, the value of the spending multiplier is: A) 1. B) 2. C) 4. D) 9.
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Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/MPS. Therefore, with an MPS of 0.50, the spending multiplier would be 1/0.50 = 2. This means that for every $1 increase in spending, there would be a $2 increase in overall economic activity.

If the Marginal Propensity to Save (MPS) Is 0