Question

The multiplier will be

a. larger, the smaller the MPC and the larger the MPS.
b. larger, the larger the MPC and the smaller the MPS.
c. smaller, the smaller the MPC and the smaller the MPS.
d. smaller, the larger the MPC and the smaller the MPS.

Answer 1

b. The multiplier will be larger, the larger the MPC and the smaller the MPS.

Step-by-step explanation:

b. The multiplier will be larger, the larger the MPC (Marginal Propensity to Consume) and the smaller the MPS (Marginal Propensity to Save).

The multiplier represents how many times a dollar will turnover in the economy. When the MPC is larger, it means that more of every dollar received will be spent, resulting in a larger multiplier. On the other hand, when the MPS is smaller, it means that less of every dollar received will be saved, also resulting in a larger multiplier.