If households in the economy save more of any extra income that they earn, then the multiplier effect will:
A) Increase
B) Decrease
C) Be unaffected
D) Become less than 1.0

Question

Quizplus · Accepted Answer

The multiplier effect is the factor by which an initial change in spending will multiply throughout the economy. If households save more of any extra income, they will spend less, reducing the initial change in spending. As a result, the multiplier effect will decrease.

If Households in the Economy Save More of Any Extra