Answer to Question #317258 in Macroeconomics for Tshidi

Question

What effect a reduction in marginal propensity to consume has on the size of the multiplier

Answer 1

A reduction in marginal propensity to consume reduces the size of the multiplier. This is because there is directly proportional relationship between MPC and the multiplier, given by $multiplier (M) = \frac{1}{1-MPC}$