Consider two economies, each with a marginal propensity to consume of 0.8 and a net tax rate of 0.2. One economy is closed to international trade; the second is open to international trade with a marginal propensity to import of 0.3. Suppose there is an increase in autonomous spending of $5 billion in each of these economies. Which of the following statements is true?
A)The AD curve shifts to the right by more in the closed economy than in the open economy.
B)The simple multiplier is larger in the open economy than in the closed economy.
C)The AD curve shifts to the right by more in the open economy than in the closed economy.
D)The AD curve shifts to the right by the same amount in both economies.
E)The AD curve shifts to the left by the same amount in both economies.

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The Answer of Consider two economies, each with a marginal propensity to consume of 0.8 and a net tax rate of 0.2. One economy is closed to international trade; the second is open to international trade with a marginal propensity to import of 0.3. Suppose there is an increase in autonomous spending of $5 billion in each of these economies. Which of the following statements is true?
A)The AD curve shifts to the right by more in the closed economy than in the open economy.
B)The simple multiplier is larger in the open economy than in the closed economy.
C)The AD curve shifts to the right by more in the open economy than in the closed economy.
D)The AD curve shifts to the right by the same amount in both economies.
E)The AD curve shifts to the left by the same amount in both economies.

Consider Two Economies, Each with a Marginal Propensity to Consume