In an open economy, the marginal propensity to import is added to the denominator of the multiplier formula.

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In an open economy, the marginal propensity to import represents the portion of additional income that will be spent on imports, reducing the amount of income available for domestic spending. As such, it is added to the denominator of the multiplier formula, which reflects the relationship between changes in income and changes in spending. This adjustment is necessary to account for the leakages from the economy that occur due to imports.

In an Open Economy, the Marginal Propensity to Import Is