How Does the Multiplier Change When the MPC Increases, and What

question 45

Multiple Choice

How does the multiplier change when the MPC increases, and what is the effect on aggregate demand?

• A) Higher MPC increases the multiplier so that changes in government expenditures have a larger effect on aggregate demand.
• B) Higher MPC increases the multiplier so that changes in government expenditures have a smaller effect on aggregate demand.
• C) Higher MPC decreases the multiplier so that changes in government expenditures have a larger effect on aggregate demand.
• D) Higher MPC decreases the multiplier so that changes in government expenditures have a smaller effect on aggregate demand.

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