The ________ the marginal propensity to import,the ________ the multiplier.
A)larger;larger
B)larger;smaller
C)larger;more negative
D)smaller;smaller
E)None of the above is correct,because the expenditure multiplier is not related to the marginal propensity to import.

Question

Quizplus · Accepted Answer

The larger the marginal propensity to import, the larger the leakage from the circular flow of income and the smaller the multiplier effect on aggregate demand. This is because a higher propensity to import means that a larger portion of each additional dollar of income will be spent on imports rather than domestic goods and services, leading to a reduced increase in total spending throughout the economy. Therefore, choice B is the correct answer.

The ________ the Marginal Propensity to Import,the ________ the Multiplier

The the Marginal Propensity to Import,the the Multiplier