An Increase in the Marginal Propensity to Import Will Cause

question 18

Multiple Choice

An increase in the marginal propensity to import will cause:

• A) the ZZ line to become flatter and a given change in government spending to have a larger effect on domestic output.
• B) the ZZ line to become flatter and a given change in government spending to have a smaller effect on domestic output.
• C) the ZZ line to become steeper and a given change in government spending to have a larger effect on domestic output.
• D) the ZZ line to become steeper and a given change in government spending to have a smaller effect on domestic output.
• E) the ZZ line to become flatter and a given change in government spending to have no effect on domestic output.

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Definitions:

Residual Standard Deviation

A statistical measure that quantifies the amount by which an observed variable differs from its estimated value.

Sharpe's Measure

A risk-adjusted performance metric that measures the excess return per unit of deviation in an investment asset or portfolio.

Residual Standard Deviation

A measure of the amount by which each observed value in a data set differs from the average of those values.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 indicates higher volatility than the market, while a beta less than 1 indicates lower.