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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

ConceptConsumption Function and Propensity to Save

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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