Consider an open economy that has a marginal propensity to import equal to 0.30.If national income rises by $2500,imports will rise by
A)$30.
B)$300.
C)$750.
D)$7500.
E)$8333.

Question

Quizplus · Accepted Answer

The marginal propensity to import (MPC) of 0.30 means that for every $1 increase in national income, $0.30 will be spent on imports. Therefore, for a $2500 increase in national income, the increase in imports will be 0.30 x $2500 = $750. Thus, the answer is C.

Consider an Open Economy That Has a Marginal Propensity to Import