Which of the following is equal to the simple multiplier?
A) the marginal propensity to save
B) the marginal propensity to consume
C) the reciprocal of the marginal propensity to save
D) the reciprocal of the marginal propensity to consume

Question

Which of the following is equal to the simple multiplier?  
A) the marginal propensity to save 
B) the marginal propensity to consume 
C) the reciprocal of the marginal propensity to save 
D) the reciprocal of the marginal propensity to consume

Quizplus · Accepted Answer

The simple multiplier is equal to the reciprocal of the marginal propensity to save. This means that as the marginal propensity to save decreases, the simple multiplier will increase, indicating a greater overall impact on the economy from a change in a particular expenditure. The other choices (A) and (B) are not equal to the simple multiplier, and (D) is incorrect because the reciprocal of the marginal propensity to consume would be greater than one, which does not make sense in the context of the multiplier.

Which of the Following Is Equal to the Simple Multiplier