The marginal propensity to import defines the relationship between changes in imports and changes in
A) investment spending.
B) real GDP.
C) exports.
D) consumption expenditure.

Question

Quizplus · Accepted Answer

The marginal propensity to import refers to the proportion of each additional dollar of income that is spent on imports. Therefore, it directly affects changes in real GDP through changes in imports. As income increases, so does consumption expenditure, which leads to an increase in imports. Therefore, the marginal propensity to import plays a crucial role in determining the overall impact of changes in income on the economy.

The Marginal Propensity to Import Defines the Relationship Between Changes