An Increase in the Marginal Propensity to Import Will Cause

question 38

Multiple Choice

An increase in the marginal propensity to import will cause:

• A) the multiplier to increase and a given change in government spending to have a larger effect on domestic output.
• B) the multiplier to increase and a given change in government spending to have a smaller effect on domestic output.
• C) the multiplier to decrease and a given change in government spending to have a larger effect on domestic output.
• D) the multiplier to decrease and a given change in government spending to have a smaller effect on domestic output.
• E) the multiplier to decrease and a given change in government spending to have no effect on domestic output.

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Definitions:

Relative Scarcity

Relative scarcity refers to the situation where a resource is limited in supply when compared to the demand for it.

Marginal Tax Rates

The rate of tax applied to the next dollar of taxable income, which increases as income rises within progressive tax systems.

Dual-Earner Families

Dual-earner families are those where both partners in a household engage in paid employment.

Earnings Differential

The difference in wages or income between two groups due to various factors such as education, experience, or gender.