The larger the marginal propensity to import,the smaller the government purchases multiplier.

Name: The larger the marginal propensity to import,the smaller the government purchases multiplier.
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Question

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When the marginal propensity to import is larger, a larger portion of any government purchases will leak out of the economy through imports, resulting in smaller increases in aggregate demand and therefore a smaller government purchases multiplier.

The Larger the Marginal Propensity to Import,the Smaller the Government