If the marginal propensity to save (MPS) is 0.1, the spending multiplier will be
A) 10.
B) 1.1.
C) 0.9.
D) 0.1.

Name: If the marginal propensity to save (MPS) is 0.1, the spending multiplier will be A) 10. B) 1.1. C) 0.9. D) 0.1.
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Question

Quizplus · Accepted Answer

The spending multiplier is calculated as 1/MPS. Since MPS is given as 0.1, the spending multiplier is 1/0.1 = 10. Therefore, a $1 increase in spending will increase the total income by $10.

If the Marginal Propensity to Save (MPS) Is 0