The ________ the marginal propensity to import, the ________ the expenditure multiplier. A. larger; smaller B....
The ________ the marginal propensity to import, the ________ the expenditure multiplier.
A.
larger; smaller
B.
smaller; smaller
C.
larger; more negative
D.
larger; larger
E.
None of the above is correct, because the expenditure multiplier is not related to the marginal propensity to import.
Homework Answers
Correct option is (A).
Spending multiplier = 1 / (MPS + MPM) where MPS: Marginal propensity to save, MPM: Marginal propensity to import
The larger the MPM, the larger the value of (MPS + MPM) and so, the smaller the multiplier.
Add Answer to:
The ________ the marginal propensity to import, the ________ the
expenditure multiplier.
A.
larger; smaller
B....
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