Increases in the marginal propensity to consume (MPC) ,other things constant,_____.

A) increase the value of the multiplier
B) decrease the value of the multiplier
C) increase the marginal propensity to save
D) shift the aggregate expenditure curve downward
E) cause a downward movement along the aggregate expenditure curve

Question

Ashton Soliman · Accepted Answer

Final Answer : A, Explanation :  An increase in MPC means that for every additional dollar of income, consumers will spend more, which in turn leads to a larger increase in aggregate expenditure. This increase in expenditure results in a larger multiplier effect, as each dollar of spending creates a larger chain reaction of additional spending in the economy. Therefore, an increase in MPC increases the value of the multiplier.

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