Final answer:
With an MPS of 0.1, the spending multiplier is calculated as 1 / (1 - MPC) which is 10. This calculation assumes no taxes or imports are considered.
Step-by-step explanation:
If the Marginal Propensity to Save (MPS) is 0.1, the corresponding Marginal Propensity to Consume (MPC) would be equal to 1 - MPS, which is 0.9 in this case.
To calculate the government spending multiplier, formula usually used is 1 / (1 - MPC), adjusting for tax rate and marginal propensity to import.
However, given the initial MPS value, if we don't consider taxes and imports, the government spending multiplier would simply be 1 / (1 - 0.9), which results in a multiplier of 10.
This means that a dollar of government spending could potentially lead to a tenfold increase in economic output under these simplified assumptions.