Exhibit 13.1
Assume the marginal propensity to consume for U.S.households equals 0.9,and the marginal propensity to import for the United States equals 0.1.Suppose there occurs an increase in investment of $10 billion at each level of income.
-Refer to Exhibit 13.1.The change in the level of U.S.imports resulting from the rise in U.S.income equals:
A) $5 billion
B) $10 billion
C) $15 billion
D) $20 billion

Question

Quizplus · Accepted Answer

The change in the level of U.S. imports resulting from the rise in U.S. income equals $5 billion. This is because the marginal propensity to import is 0.1, which means that for every $1 increase in income, imports will increase by $0.1. Therefore, a $10 billion increase in investment will lead to a $1 billion increase in imports, and a $10 billion increase in income will lead to a $5 billion increase in imports.

Exhibit 13.1 Assume the Marginal Propensity to Consume for U.S.households Equals 0.9,and