Suppose the overall MPC is 0.9. If a $2 billion increase in imports to the United States will lead to a $10 billion decrease in GDP, the value of the marginal propensity to import must be

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Quizplus · Accepted Answer

The marginal propensity to import (MPI) is the change in imports divided by the change in GDP. In this case, the change in imports is -$2 billion and the change in GDP is -$10 billion, so the MPI is -$2 billion / -$10 billion = 0.2.

Suppose the Overall MPC Is 0