Explain how the multiplier effect results form an increase in government spending. Why should a bigger MPC make the multiplier effect larger?

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Social Studies

Tiny

2 April, 15:56

Explain how the multiplier effect results form an increase in government spending. Why should a bigger MPC make the multiplier effect larger?

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Kristina Mendoza · Answer 1

-Economy stimuli

Explanation:

This is the theory that an increased government spending stimulated the economy causing an increase in private spending which would add to the stimuli of the economy in a whole thereby increasing income and mpc.

- It is believed that the multiplier effect is larger because consumers would spend more to meet all their needs and wants due to change in some components of aggregate expenditure.