Which of the following is true about the marginal propensity to consume and the marginal propensity to import?
A)The marginal propensity to import is typically smaller than the marginal propensity to consume because when income rises, not all goods we consume are imported.
B)The marginal propensity to import is always larger than the marginal propensity to consume because when income rises, not all goods we consume are imported.
C)The marginal propensity to import is always the same as the marginal propensity to consume because when income rises, not all goods we import are consumed.
D)The sum of the marginal propensity to import and the marginal propensity to consume is always equal to one because when income rises, we either consume or import.
E)The marginal propensity to import is sometimes larger and sometimes smaller than the marginal propensity to consume because when income rises, all goods we consume are imported.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the increase in consumer spending when income increases by $1, while the marginal propensity to import (MPI) is the increase in imports when income increases by $1. Since not all goods we consume are imported, the MPI is typically smaller than the MPC. Therefore, choice A is the correct answer.

Which of the Following Is True About the Marginal Propensity