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An Increase in the Marginal Propensity to Import Will Cause

Question 1

Multiple Choice

An increase in the marginal propensity to import will cause:

A) the multiplier to increase and a given change in government spending to have a larger effect on domestic output.
B) the multiplier to increase and a given change in government spending to have a smaller effect on domestic output.
C) the multiplier to decrease and a given change in government spending to have a larger effect on domestic output.
D) the multiplier to decrease and a given change in government spending to have a smaller effect on domestic output.
E) the multiplier to decrease and a given change in government spending to have no effect on domestic output.

Correct Answer: