If an Economy Has a Marginal Propensity to Import of 0.3

question 25

Multiple Choice

If an economy has a marginal propensity to import of 0.3 and the economy's balance-of-trade deficit is 15, how much must the economy contract its GNP if income contraction is to be the method of removing the balance-of-trade deficit?

• A) 4.5
• B) 45
• C) 50
• D) 200

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Definitions:

Pancreas

A gland located behind the stomach that produces enzymes for digestion and hormones such as insulin for blood sugar regulation.

Permeable

Allowing liquids or gases to pass through it.

Capillaries

The smallest blood vessels in the body, responsible for the exchange of oxygen, carbon dioxide, and nutrients between blood and tissues.

Impermeable

Incapable of being passed through or penetrated, often used to describe materials that liquids or gases cannot permeate.