An increase in the marginal propensity to consumer (MPC) ?
Correct answer: A. raises the value of the multiplier
- A. raises the value of the multiplier
- B. has no impact on the value of the multiplier?
- C. rarely occurs because the MPC is set by congressional legislation
- D. lowers the value of the multiplier
Explanation
The simple spending multiplier is 1 divided by 1 minus the MPC, so a higher MPC produces a larger multiplier. A higher MPC means each round of additional income generates more consumption spending.
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The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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