If the marginal propensity to import increases, then the
A) multiplier will not change in value.
B) multiplier will increase in value.
C) effect on the multiplier will depend on what happens to exports.
D) multiplier will decrease in value.

Question

Quizplus · Accepted Answer

If the marginal propensity to import increases, it means that a larger percentage of any increase in income will go towards imports rather than domestic goods and services. This means that there will be a smaller increase in domestic demand, leading to a smaller multiplier effect. Therefore, the multiplier will decrease in value.

If the Marginal Propensity to Import Increases, Then the