The open economy multiplier is calculated as follows: A. 1/[1minus−(marginal propensity to consume + marginal propensity...

Question

Question

The open economy multiplier is calculated as follows:

A. 1/[1minus−(marginal propensity to consume + marginal propensity to invest)]

B. 1/[1minus−(marginal propensity to consume + marginal propensity to import)]

C. 1/[1minus−(marginal propensity to consume + marginal propensity to invest + marginal propensity to import)]

D. 1/[1minus−(marginal propensity to consume + marginal propensity to invest

minus− marginal propensity to import)]

business economics

Answer 1

Answer #1

The multiplier in open economy:

Multiplier = [1 / (1 - MPC + MPM)]

Where, MPC is marginal propensity to consume.

MPM is marginal propensity to import.

Answer: option (b)

Answer 2

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The open economy multiplier is calculated as​ follows: A. ​1/[1minus−​(marginal propensity to consume​ + marginal propensity...