If the marginal propensity to save is 0.2,how much is the spending multiplier?
A) 0.8
B) 1.25
C) 5
D) 8

Name: If the marginal propensity to save is 0.2,how much is the spending multiplier? A) 0.8 B) 1.25 C) 5 D) 8
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Quizplus · Accepted Answer

The spending multiplier is calculated as 1/(1-MPC). If the marginal propensity to save (MPS) is 0.2, then the marginal propensity to consume (MPC) is 0.8. Therefore, the multiplier is 1/(1-0.8) = 1/0.2 = 5.

If the Marginal Propensity to Save Is 0