The larger the marginal propensity to consume, the larger the multiplier effect.

Question

Quizplus · Accepted Answer

The larger the marginal propensity to consume, the larger the initial increase in spending will lead to an even greater increase in total output due to the multiplier effect. This is because a higher marginal propensity to consume means that there will be a greater increase in consumption from an initial increase in income, leading to more rounds of spending and income generation throughout the economy, and ultimately a larger increase in total output.

The Larger the Marginal Propensity to Consume, the Larger the Multiplier