When the Marginal Propensity to Consume (MPC) Increases

question 152

Multiple Choice

When the marginal propensity to consume (MPC) increases

• A) the multiplier remains unchanged.
• B) the multiplier increases.
• C) the multiplier decreases.
• D) the average propensity to save remains unchanged.

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Definitions:

Labor Productivity Growth

An increase in the output of goods and services per hour worked, which can lead to higher living standards and economic growth.

Real Wage

The purchasing power of wages, taking into account the impact of inflation, indicating how many goods and services wages can buy.

Nominal Wage

The wage or salary that is paid to workers in current dollars, without adjusting for inflation or purchasing power.

General Price Level

An indicator of the average prices of goods and services throughout an economy over a period of time, often used to measure inflation.