The larger the marginal propensity to save,
A) the smaller the multiplier.
B) the larger the multiplier.
C) the smaller the change in Real GDP,given a change in autonomous consumption.
D) a and c
E) none of the above

Question

Quizplus · Accepted Answer

The marginal propensity to save (MPS) is inversely related to the multiplier effect; thus, a larger MPS results in a smaller multiplier. Additionally, a larger MPS means that any change in autonomous consumption leads to a smaller change in Real GDP, as more of the income is saved rather than spent.

The Larger the Marginal Propensity to Save