Question

The larger the mpc (marginal propensity to consume), the ______ the income-expenditure multiplier and the ______ the effect of a change in autonomous spending on short-run equilibrium output.

Answer 1

Answer:

The correct answer is: larger; greater

Explanation:

Marginal propensity to consume shows the portion of disposable income that will be spent on the consumption of goods and services. Higher the marginal propensity to consume higher will be consumption spending.  

The expenditure spending multiplier shows the increase in income due to an increase in autonomous expenditure.  

Higher the marginal propensity to consume higher will be the investment-expenditure multiplier and greater will be the change in the output level because of change in autonomous spending.