What is the effect of an increase in the marginal propensity to consume (MPC) on the multiplier?

Multiple choice question for Macroeconomic Policy Tools. Select an option, then review the explanation below.

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It increases the multiplier's magnitudeIt does not affect the multiplier at allIt seldom happens since the MPC is determined by lawIt decreases the size of the multiplierIt causes the multiplier to become unstable

Explanation

An increase in the marginal propensity to consume leads to a higher multiplier because consumers spend a larger portion of additional income, amplifying the overall economic impact.

Practice related questions from the same subject.

1.Which of the following functions as an automatic economic stabilizer?
2.If the government raises its spending by Rs16 billion and the multiplier effect outweighs the crowding out effect, what will be the impact on the economy?
3.Which economic phenomenon is illustrated when higher government spending boosts income, shifts the demand for money to the right, increases interest rates, and consequently reduces investment?
4.What is the immediate effect of a rise in government expenditure on the economy?
5.What is the primary impact of an increase in the money supply?

What is the effect of an increase in the marginal propensity to consume (MPC) on the multiplier?

Explanation

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