In an open economy,which of the following will cause an increase in the size of the multiplier?

Question

Quizplus · Accepted Answer

If there is a reduction in the marginal propensity to import, it means that a larger share of the spending will be on domestically produced goods and services, and hence the multiplier effect on the domestic economy will be greater. Reducing foreign output or increasing the marginal propensity to save may affect the overall level of economic activity, but it will not necessarily increase the size of the multiplier.

In an Open Economy,which of the Following Will Cause an Increase