If the marginal propensity to consume decreases,the multiplier will increase.

Name: If the marginal propensity to consume decreases,the multiplier will increase.
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Question

Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC stands for marginal propensity to consume. If MPC decreases, then (1-MPC) increases, which means the denominator of the multiplier increases. Therefore, the multiplier decreases, not increases.

If the Marginal Propensity to Consume Decreases,the Multiplier Will Increase