The ________ the marginal propensity to import, the ________ the expenditure multiplier.
A) smaller; smaller
B) larger; larger
C) larger; smaller
D) larger; more negative
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 expenditure multiplier is inversely related to the marginal propensity to import. A larger marginal propensity to import reduces the multiplier effect because more income is spent on imports rather than domestic goods.

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

The the Marginal Propensity to Import, the the Expenditure