Compared to the magnitude of the expenditure multiplier in an economy without imports, the expenditure multiplier in an identical economy with imports is
A) always smaller.
B) always larger.
C) smaller only if imports exceed exports.
D) larger only if exports exceed imports.
E) exactly the same.

Question

Quizplus · Accepted Answer

The presence of imports in an economy reduces the expenditure multiplier because part of the spending leaks out of the domestic economy, reducing the overall impact of initial spending.

Compared to the Magnitude of the Expenditure Multiplier in an Economy