The smaller the MPC:
A)the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption.
B)the greater the fraction of an increase in AD due to an increase in government purchases that is consumption.
C)the greater the change in government purchases required to achieve a given change in AD.
D)(a) and (c)

Question

The smaller the MPC:
A)​the smaller the fraction of an increase in AD due to an increase in government purchases that is consumption.
B)​the greater the fraction of an increase in AD due to an increase in government purchases that is consumption.
C)​the greater the change in government purchases required to achieve a given change in AD.
D)​(a) and (c)

Quizplus · Accepted Answer

The smaller the Marginal Propensity to Consume (MPC), the less of each additional dollar of income that is spent on consumption, leading to a smaller fraction of an increase in Aggregate Demand (AD) due to an increase in government purchases being consumption (A), and a greater change in government purchases required to achieve a given change in AD (C).

The Smaller the MPC