Marginal propensity to import affect government multiplier

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Reference no: EM13834780

All else equal, in an open economy, how would an increase in the marginal propensity to import (MPI) affect the government purchases multiplier?

A. It increases the multiplier only if marginal propensity to consume (MPC) is higher than the tax rate.

B. It increases the multiplier only if marginal propensity to consume (MPC) is greater than marginal propensity to import (MPI).

C. It decreases the government purchases multiplier

D. It has no effect

E. it increases the government purchases multiplier

Reference no: EM13834780

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