The marginal propensity to import is larger in Mexico than in the United States. As a result,
A)there is more autonomous expenditure in Mexico.
B)there is less autonomous investment in Mexico.
C)induced expenditure is larger in Mexico.
D)the expenditure multiplier is larger in Mexico.
E)the expenditure multiplier is larger in the United States.

Question

Quizplus · Accepted Answer

A larger marginal propensity to import means that a larger portion of any additional income is spent on imports rather than domestic goods. This reduces the overall impact of domestic spending on the economy, leading to a smaller expenditure multiplier. Therefore, the expenditure multiplier is larger in the United States, where the marginal propensity to import is smaller.

The Marginal Propensity to Import Is Larger in Mexico Than