The table below shows national income and imports.The level of exports is fixed at $300.All figures in the table and in the questions are in millions of dollars. TABLE 22-1 Refer to Table 22-1.What is the marginal propensity to import?
A)0.01
B)0.10
C)1.0
D)10.0
E)not enough data to determine

Question

The table below shows national income and imports.The level of exports is fixed at $300.All figures in the table and in the questions are in millions of dollars.  TABLE 22-1 Refer to Table 22-1.What is the marginal propensity to import?
A)0.01 
B)0.10 
C)1.0 
D)10.0 
E)not enough data to determine

Quizplus · Accepted Answer

The marginal propensity to import (MPI) is the change in imports divided by the change in income. Since exports are fixed, we can calculate the change in imports as Imports at Y2 - Imports at Y1 = 350 - 250 = 100. The change in income is Y2 - Y1 = 1000 - 500 = 500. Therefore, MPI = 100/500 = 0.1. The best answer is B.

The Table Below Shows National Income and Imports