The figure above shows two aggregate expenditure lines.
-In the figure above, if the marginal propensity to import increased, the aggregate expenditure lines would ________ and the multiplier would ________ in value.
A) become less steep; fall
B) become less steep; rise
C) not change; fall
D) become steeper; rise
E) not change; rise

Question

The figure above shows two aggregate expenditure lines.
-In the figure above, if the marginal propensity to import increased, the aggregate expenditure lines would ________ and the multiplier would ________ in value.
A) become less steep; fall 
B) become less steep; rise 
C) not change; fall 
D) become steeper; rise 
E) not change; rise

Quizplus · Accepted Answer

An increase in the marginal propensity to import would cause the aggregate expenditure lines to become less steep, as more income would be spent on imports rather than domestic goods. This, in turn, would reduce the multiplier effect, causing the multiplier to fall in value.

The Figure Above Shows Two Aggregate Expenditure Lines