to save (s) is just (1-c), the multiplier is higher when the marginal propensity to save is lower. In general, the lower are the leakages (taxes, saving and imports) from the expenditure system, the higher will be multiplier. This is because the lower the leakages from each spending round, the larger is the induced consumption and the longer is the adjustment process following an initial injection of demand. What happens if households decide to save more per dollar of disposable income received? That is, what will be the impact on national income and output if the marginal propensity to consume falls? Earlier in the Chapter, we learned that the slope of the Aggregate Demand Function (see Figure 8.5) was [c(1-t) - m], which tells us that the change in aggregate spending for a given change in national income is larger, the larger is the marginal propensity to consume (c) and the lower is the tax rate (t) and the marginal propensity to import (m). Consider an increase in the marginal propensity to consume (c). Figure 8.12 depicts this case. The initial Aggregate Demand Function (for MPC 0 ) is associated with a national income equilibrium at Point A where E* 0 generates production and national income of Y* 0 . When the marginal propensity to consume rises to MPC 1 , the Aggregate Demand Function pivots upwards at the vertical intercept. At the current equilibrium income level, Y* 0 , households choose to spend an increased proportion of each dollar