Suppose that the marginal propensity to save (MPS) equals 0.4. The value of the multiplier would be
A) 0.25.
B) 0.4.
C) 2.5.
D) 4.

Name: Suppose that the marginal propensity to save (MPS) equals 0.4. The value of the multiplier would be A) 0.25. B) 0.4. C) 2.5. D) 4.
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Question

Quizplus · Accepted Answer

The value of the multiplier is calculated as 1/MPS. Therefore, in this case, the multiplier would be 1/0.4 = 2.5.

Suppose That the Marginal Propensity to Save (MPS) Equals 0