Question about open economy multiplier

Reference no: EM1369986

In a closed economy, marginal propensity to consume is 0.6. If the economy opens up to the world and marginal propensity to import is 0.4, using the Keynesian model of output determination, the multiplier will:

A) increase by half of its original value.
B) decrease by half of its original value.
C) decrease by a fourth of its original value.
D) now equal zero.
E) now equal infinity.

Reference no: EM1369986

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