Is the following statement true or false? If the marginal propensity to consume is 75%, the...

Question:

Is the following statement true or false?

If the marginal propensity to consume is 75%, the spending multiplier will be 4.

Marginal Propensity to Consume:

The marginal propensity to consume is a number between 0 and 1 inclusive. It tells us how much of an additional dollar in income, an individual or group spends on consumption. Anything not spent on consumption is saved.

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The Multiplier Effect and the Simple Spending Multiplier: Definition and Examples

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Chapter 5 / Lesson 9
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Learn about the multiplier effect and the spending/expenditure multiplier, including the marginal propensity to consume and the marginal propensity to save.


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