Practicing Success
"Higher the value of marginal propensity to save, higher will be the multiplier" |
The statement is true The statement is false The statement is partially true Can't say anything about the statement |
The statement is false |
Higher the value of MPC i.e. marginal propensity to consume, higher will be the multiplier and Higher the value of MPS i.e. marginal propensity to save, lower will be the multiplier. For example: MPS= 0.2 k=\(\frac{ 1}{ MPS}\) i.e. k= 5 where k stands for multiplier. Now as MPS increases i.e. MPS= 0.5 k=\(\frac{1 }{ MPS}\) i.e. k= 2 Which shows that as MPS increases, value of multiplier decreases. |