The formula for the multiplier in an open economy is
A)1/(1 + slope of the AE curve).
B)1/(1 - marginal propensity to import).
C)1/(1 + marginal propensity to import).
D)1/(1 - slope of the AE curve).
E)1/(1 - MPC).

Question

Quizplus · Accepted Answer

In an open economy, the multiplier is calculated as 1/(1 - slope of the AE curve), where the slope of the AE curve includes the marginal propensity to consume, import, and other leakages.

The Formula for the Multiplier in an Open Economy Is