Question

Explain any two characteristics of multiplier.

Answer 1

1. There is an inverse relationship between the marginal propensity to save (MPS) and the size of the multiplier. This means that as people save more and consume less out of an additional income, the multiplier effect becomes smaller.
2. The size of the multiplier depends on the total leakages out of the current income flow. Leakages refer to income that is not spent on currently produced consumption goods and services, which reduces the amount of income circulating and thus decreases the multiplier’s size.