As the MPS decreases, the multiplier will
A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease depending on the size of the change in investment.

Question

Quizplus · Accepted Answer

The multiplier is inversely related to the marginal propensity to save (MPS). As MPS decreases, the multiplier increases because a smaller portion of additional income is saved, leading to a larger effect on aggregate demand.

As the MPS Decreases, the Multiplier Will