A Decrease in the Marginal Propensity to Import ________, Everything

question 4

Multiple Choice

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

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Definitions:

Externalities

Costs or benefits arising from an economic activity that affect bystanders and are not reflected in market prices.

Distortionary Taxes

Taxes that cause changes in behavior and decision-making, leading to inefficiencies in the market.

Nonneutral Taxes

Taxes that disproportionately affect one group or type of economic activity over another, often used to influence market outcomes.

Second Best

A situation or solution that is accepted in the absence of a preferred option.