The fraction of additional income spent on imports is called the

Question

Quizplus · Accepted Answer

The fraction of additional income (or increase in disposable income) that is spent on imports is called the marginal propensity to import (MPI). This is an important concept in macroeconomics as it helps to understand how changes in income and overall economic activity can affect imports and the trade balance. Choice A (import function) is not a commonly used term in economics, and choice C (marginal propensity to export) refers to the fraction of additional income that is spent on exports, not imports. Choice D (trade balance) is a broader concept that refers to the difference between a country's exports and imports, and is not specific to the fraction of additional income spent on imports.

The Fraction of Additional Income Spent on Imports Is Called