Each additional round of the multiplier process will tend to be larger:
A)the smaller the MPC.
B)the greater the rate of income taxation.
C)the less people save from increases in their incomes.
D)the larger the fraction of each dollar of domestic income spent on imported goods.
E)in each of the above cases.

Question

Each additional round of the multiplier process will tend to be larger:
A)​the smaller the MPC.
B)​the greater the rate of income taxation.
C)​the less people save from increases in their incomes.
D)​the larger the fraction of each dollar of domestic income spent on imported goods.
E)​in each of the above cases.

Quizplus · Accepted Answer

The multiplier process amplifies the effect of an initial change in spending through successive rounds of spending, primarily influenced by the marginal propensity to consume (MPC). The less people save (i.e., the higher the MPC), the larger each additional round of spending will be, as more of each income increase is spent rather than saved.

Each Additional Round of the Multiplier Process Will Tend to Be