ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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false
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true
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Either A or B
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None of the above
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Detailed explanation-1: -Therefore, when marginal propensity to consume is zero, the value of multiplier will be one. It means that increase in income will just be equal to increase in investment.
Detailed explanation-2: -An MPC equal to zero means that a change of income led to no change in consumption. So, a person spent none of the change in income and, instead, put it into savings. An MPC that is higher than one means that additional income led to spending that surpassed the amount of additional income.
Detailed explanation-3: -MPS = 0, multiplier = infinity; MPS = . 4, multiplier = 2.5; MPS = . 6, multiplier = 1.67; MPS = 1, multiplier = 1.
Detailed explanation-4: -Therefore, the value of the multiplier is infinity.
Detailed explanation-5: -(i) No, the statement is false. When MPC is zero, the value of investment multiplier will be 1.