Multiplier in an open economy with no government taxing or spending is:
A) 1/(1-MPC).
B) 1/(MPC + MPZ).
C) 1/(1 - MPS).
D) 1/(MPS + MPZ).

Name: Multiplier in an open economy with no government taxing or spending is: A) 1/(1-MPC). B) 1/(MPC + MPZ). C) 1/(1 - MPS). D) 1/(MPS + MPZ).
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Question

Quizplus · Accepted Answer

In an open economy, the multiplier is calculated as 1/(MPS + MPZ), where MPS is the marginal propensity to save and MPZ is the marginal propensity to import.

Multiplier in an Open Economy with No Government Taxing or Spending