A decrease in the marginal propensity to import ________, everything else remaining the same.
A)makes the multiplier larger
B)makes the multiplier smaller
C)has no effect on the multiplier
D)sometimes increases the multiplier and sometimes decreases the multiplier
E)increases the marginal propensity to consume

Question

Quizplus · Accepted Answer

A decrease in the marginal propensity to import means that a smaller portion of each dollar spent goes towards importing goods and services, leaving a larger portion to be spent domestically. This increases the multiplier effect, as each dollar spent domestically will then be spent again by another person or business, further stimulating the economy. Therefore, a decrease in the marginal propensity to import makes the multiplier larger.

A Decrease in the Marginal Propensity to Import ________, Everything