Asked by Michaela Sharp on May 07, 2024
Verified
The smaller the marginal propensity to save,other things constant,_____.
A) the smaller the marginal propensity to consume
B) the larger the marginal propensity to consume
C) the smaller the multiplier
D) the flatter the consumption function
E) the steeper the saving function
Marginal Propensity
The proportion of an additional income that an individual spends on consuming goods and services, rather than saving.
Consumption Function
An economic formula representing the relationship between total consumption and gross national income, suggesting how income influences spending behavior.
- Ascertain and acknowledge the implications of the straightforward spending multiplier relative to the marginal propensity to consume and save.
- Acquire knowledge on how the marginal propensity to consume (MPC) influences the spending multiplier.
Verified Answer
GM
Garrett MoralesMay 14, 2024
Final Answer :
B
Explanation :
The smaller the marginal propensity to save, the more likely people are to spend a larger proportion of their income, therefore the larger the marginal propensity to consume.
Learning Objectives
- Ascertain and acknowledge the implications of the straightforward spending multiplier relative to the marginal propensity to consume and save.
- Acquire knowledge on how the marginal propensity to consume (MPC) influences the spending multiplier.