Assertion (A): The larger the MPC, the larger the investment multiplier.
Reason (R): With a larger MPC, more of each round of new income is spent and becomes someone else's income.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

k = 1 ÷ (1 − MPC) rises with MPC, because less leaks into saving each round. R explains A.

Concept: MPC and the multiplier
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe investment multiplier

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Assertion (A): The larger the MPC, the larger the investment multiplier.Reason (R): With a larger MPC, more of each round of new income is spent and becomes someone else's income.

Explanation

Assertion (A): The larger the MPC, the larger the investment multiplier.
Reason (R): With a larger MPC, more of each round of new income is spent and becomes someone else's income.