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SOLUTION: Answer question. – Studypool.

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KEYNESIAN PROGRAMS
1
Keynesian programs
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KEYNESIAN PROGRAMS
2
Qn. 1
The spending multiplier is the reciprocal o of the marginal propensity to save (MPS).
This means that when the MPS is high, the multiplier is lower and vice versa. Spending
multiplier is important because it helps economists to come up with a suitable stimulus for the
economy. MPS affects the stimulus directly because it is high it means that the consumers are
not spending which in return decreases the multiplier which results in a smaller and a stimulus
which is not effective. On the other hand, when there are more sp…
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