Question

what happens If a multiplier is negative

Answer 1

MPC is marginal propensity to consumer and MPS is marginal propensity to save.

MPC=1-MPS

MPS+MPC=1

Since MPC and MPS are always less than 1. These values cannot be negative.

The spending multiplier=1/ (1-MPC) or

=1/MPS

Since MPS cannot be negative, therefore, multiplier cannot be negative.

But if we suppose it is negative, then with the increase in the government spending, the output will decrease by the quantity change in the spending times negative multiplier.