 # What happens to the multiplier as the MPC falls? ### Economics (MindTap Course List)

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617383 ### Economics (MindTap Course List)

13th Edition
Roger A. Arnold
Publisher: Cengage Learning
ISBN: 9781337617383

#### Solutions

Chapter
Section
Chapter 10.2, Problem 3ST
Textbook Problem

## What happens to the multiplier as the MPC falls?

Expert Solution
To determine

Impact of fall in MPC on the multiplier value.

### Explanation of Solution

Multiplier value shows us that how much times more impact will be on the economy due to a small change in the income or investment in the economy. The multiplier value is calculated with the help of the Marginal propensity to consume (MPC) by the people and the simple multiplier formula is as follows:

Multiplier value=11MPC

When the MPC of the economy was 0.70, the multiplier value of the economy was 3.33. The multiplier value can be calculated for 0.60 and 0.80, respectively, as follows:

Multiplier value=11MPC=110.60=10

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