Compared to the magnitude of the multiplier in an economy without imports, the multiplier in an identical economy with imports is
A) exactly the same.
B) smaller only if imports exceed exports.
C) always smaller.
D) larger only if exports exceed imports.
E) always larger.

Question

Quizplus · Accepted Answer

The multiplier in an economy with imports is always smaller because imports are a leakage from the income-expenditure cycle, reducing the overall impact of an initial increase in spending on the total economic output.

Compared to the Magnitude of the Multiplier in an Economy