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If the Marginal Propensity to Consume is Greater than Marginal Propensity to Save, the Value of the Multiplier Will Be (Choose the Correct Alternative) - CBSE (Arts) Class 12 - Economics

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Question

If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be (Choose the correct alternative)

(a) greater than 2

(b) less than 2

(c) equal to 2

(d) equal to 5

Solution

greater than 2

When MPC >MPS, then the value of multiplier will be greater than 2 because the value of the multiplier is directly related to the value of marginal propensity to consume. They both are directly related. In other words when MPC is more, k the multiplier is more and vice versa.

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Solution If the Marginal Propensity to Consume is Greater than Marginal Propensity to Save, the Value of the Multiplier Will Be (Choose the Correct Alternative) Concept: Consumption Function and Propensity to Save.
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