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Question

MPC increases, multiplier ______

A Increases Correct Answer Incorrect Answer
B Decreases Correct Answer Incorrect Answer
C Remains constant Correct Answer Incorrect Answer
D Becomes 1 Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

The larger the proportion of the additional income that gets devoted to spending rather than saving, the greater the effect. Therefore, higher the MPC, the higher the multiplier.

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