In reality, the simple spending multiplier [1/(MPS+MPI)] is applicable only to countries whose imports are a substantial fraction of income in foreign countries.

Name: In reality, the simple spending multiplier [1/(MPS+MPI)] is applicable only to countries whose imports are a substantial fraction of income in foreign countries.
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Quizplus · Accepted Answer

The simple spending multiplier is applicable to any economy, but it is more accurate when imports are a significant fraction of domestic income, not foreign income.

In Reality, the Simple Spending Multiplier [1/(MPS+MPI)] Is Applicable Only