An increase in the value of the simple multiplier can be caused by
A)a decrease in the marginal propensity to consume.
B)an increase in the marginal propensity to import.
C)an increase in the net tax rate.
D)an increase in the marginal propensity to save.
E)a decrease in the net tax rate.

Question

Quizplus · Accepted Answer

The value of the simple multiplier is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. Therefore, an increase in the value of the simple multiplier can be caused by a decrease in the net tax rate, which leads to an increase in disposable income and consumption, thereby increasing the MPC.

An Increase in the Value of the Simple Multiplier Can