The size of the multiplier increases as the size of the marginal propensity to consume increases.

Question

Quizplus · Accepted Answer

The multiplier shows the change in total output or income resulting from a change in autonomous spending or investment. It is calculated as 1/(1-MPC), where MPC is the marginal propensity to consume. Thus, as MPC increases, the denominator in the multiplier formula becomes smaller and the multiplier becomes larger. Therefore, the statement is true.

The Size of the Multiplier Increases as the Size of the Marginal