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Question
The value of the multiplier is: (choose the correct alternative)
a. `1/"MPC"`
b. `1/"MPS"`
c. `1/(1-"MPS")`
d. `1/(MPC- 1)`
Solution
`1/"MPS"`
Marginal Propensity to Save = 1 − Marginal Propensity to Consume
MPS = 1 − MPC
The value of the multiplier is:
`1/"MPS" or 1/(1 - "MPS")`
Where MPS is Marginal propensity to save
MPC is marginal propensity to consume
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