180 Views

Question : Value of MPS (Marginal Propensity to Save) is increased from 0.4 to 0.5. What would be the impact on Multiplier?

Option 1: The size of the multiplier would be increased.

Option 2: The size of the multiplier would remain same.

 

Option 3: Value of multiplier is undetermined with the given information.

 

Option 4: The size of the multiplier would be decreased.


Team Careers360 9th Jan, 2024
Answer (1)
Team Careers360 20th Jan, 2024

Correct Answer: The size of the multiplier would be decreased.


Solution : There is an inverse relationship between the value of the multiplier and MPS. If MPS = 0.4, then Investment Multiplier = 1/MPS = 1/0.4 = 2.5. If MPS = 0.5, then Investment Multiplier = 1/MPS = 1/0.5 = 2. It clearly shows, the size of the multiplier would be decreased with the increase in MPS.

 

Related Questions

UEI Global, Hotel Management ...
Apply
Training & Placement Guarantee | Top Recruiters: The Oberoi, Taj, Lee Meridien, Hyatt and many more
VIT Bhopal University | M.Tec...
Apply
M.Tech admissions open @ VIT Bhopal University | Highest CTC 52 LPA | Apply now
Amity University | M.Tech Adm...
Apply
Ranked amongst top 3% universities globally (QS Rankings).
Amity University Noida MBA Ad...
Apply
Amongst top 3% universities globally (QS Rankings)
Graphic Era (Deemed to be Uni...
Apply
NAAC A+ Grade | Among top 100 universities of India (NIRF 2024) | 40 crore+ scholarships distributed
XAT- Xavier Aptitude Test 2026
Apply
75+ years of legacy | #1 Entrance Exam | Score accepted by 250+ BSchools | Apply now
View All Application Forms

Download the Careers360 App on your Android phone

Regular exam updates, QnA, Predictors, College Applications & E-books now on your Mobile

150M+ Students
30,000+ Colleges
500+ Exams
1500+ E-books