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If MPS = 0.1, what is the government spending multiplier?

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If MPS = 0.1, what is the government spending multiplier?

MPS and MPC:

The MPS, the marginal propensity to save, is the amount of money someone saves due to a $1 increase in income. The MPC, the marginal propensity to consume, is the same but measures the amount of money spent on consumption.

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Answer: 10

The government spending multiplier is {eq}\frac{1}{MPS} {/eq}. This is because we are trying to find the effect of a $1 increase in...

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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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The multiplier effect is when the money spent multiplies as it filters through the economy. Explore the multiplier effect, the marginal propensity to consume, the marginal propensity to save, and find out how to use the simple spending multiplier.


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