Suppose that the marginal propensity to save (MPS) equals 0.2. The value of the multiplier would be
A) )8.
B) 1.25.
C) 2.
D) 5.

Name: Suppose that the marginal propensity to save (MPS) equals 0.2. The value of the multiplier would be A) )8. B) 1.25. C) 2. D) 5.
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Quizplus · Accepted Answer

The multiplier is calculated as 1/(1-MPC), where MPC (marginal propensity to consume) is 1 - MPS. With MPS = 0.2, MPC = 0.8, so the multiplier is 1/(1-0.8) = 1/0.2 = 5.

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