As the MPS increases the multiplier will ?
Correct answer: A. decrease
- A. decrease
- B. remain constant
- C. increase
- D. either increase or decrease depending on the size of the change in investment
Explanation
A higher MPS means a larger share of each additional income round is saved rather than spent again. This reduces successive spending rounds and therefore decreases the multiplier.
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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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