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Which factor affects Keynesian Multiplier?
Marginal Propensity to Save
Marginal Propensity to Consume
Both (a) and (b)
None of the above
- Marginal Propensity to Save (MPS): This refers to the proportion of any additional income that is saved rather than spent. A higher MPS decreases the Keynesian Multiplier since less income is spent in the economy.
- Marginal Propensity to Consume (MPC): This is the fraction of additional income that is spent on consumption. A higher MPC increases the Keynesian Multiplier as more income circulates within the economy.
- Both (a) and (b): Both MPS and MPC directly affect the Keynesian Multiplier. The multiplier is calculated as 1/(1-MPC) or 1/MPS. Thus, both factors are crucial.
- None of the above: This is incorrect, as both MPS and MPC are integral to determining the multiplier.
Your correct answer is: Option 3: Both (a) and (b)
By: santosh ProfileResourcesReport error
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