The value of the multiplier is likely to fall if there is a fall in:
A) Consumption
B) Income
C) Total spending
D) The marginal propensity to consume

Question

Quizplus · Accepted Answer

The multiplier is directly related to the marginal propensity to consume (MPC), which measures the proportion of each additional dollar of income that is spent on consumption. If the MPC falls, the multiplier also falls. Therefore, a fall in the MPC (as stated in option D) is likely to cause a fall in the value of the multiplier. The other options (consumption, income, and total spending) can also affect the multiplier indirectly, but they are not the direct cause of the multiplier change.

The Value of the Multiplier Is Likely to Fall If