If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be _______________.

greater than 2

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less than 2

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equal to 2

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equal to 5

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Solution

The correct option is C greater than 2
If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be greater than 2.
When MPC >MPS, then the value of multiplier will be greater than 2 because the value of 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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