An increase in income in an open economy nation will cause a change in consumer spending on home production, and a(n): A) increase in taxes. B) decrease in savings. C) increase in foreign production. D) increase in imports if MPC_F (marginal propensity to consume foreign goods) is greater than zero.

Question

Quizplus · Accepted Answer

An increase in income will lead to an increase in imports if the marginal propensity to consume foreign goods (MPC_F) is greater than zero. This is because with higher income, consumers may prefer to spend on foreign goods that are either cheaper or perceived to be of higher quality. Thus, choice D is the correct answer. Choices A, B, and C are not directly related to an increase in income in an open economy nation.

An Increase in Income in an Open Economy Nation Will