As the marginal propensity to consume (MPC) increases, the spending multiplier:
A) increases.
B) decreases.
C) remains constant.
D) becomes undefinable.

Name: As the marginal propensity to consume (MPC) increases, the spending multiplier: A) increases. B) decreases. C) remains constant. D) becomes undefinable.
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Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/(1-MPC). As MPC increases, the denominator (1-MPC) becomes smaller, causing the overall multiplier to increase.

As the Marginal Propensity to Consume (MPC) Increases, the Spending