Bangladeshi Short-Run and Long-Run Marginal Propensities to Consume : An Analysis

Abstract

Abstract: The short-run and long-rum marginal propensities to consume are the critical figures determining consumption, investment, government expenditure, import, and export multipliers as indicatives how effective and costly national macroeconomic policy actions .Empirical results reveal that both Bangladeshi shortand long-run marginal propensities to consume are smaller than unity. Additionally, from Keynesian macroeconomic theory, the magnitude of the MPC in the economy determines the consumption, investment, government expenditure, and import and export multipliers. Therefore, the smaller the MPCs, the smaller the multipliers are, the larger the countercyclical the policy adjustment must be to achieve a certain countercyclical macroeconomic policy objective.