In a simple economy in which prices are constant and with no income taxes or imports,the marginal propensity to save is 0.2.If exports increase $50,what impact will that have on aggregate expenditure?

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Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is 0.8 (since MPS is 0.2). The multiplier is 1/(1-MPC) = 1/0.2 = 5. An increase in exports by $50 will increase aggregate expenditure by $50 * 5 = $250.

In a Simple Economy in Which Prices Are Constant and with No