The Formula for the Spending Multiplier When Variable Net Exports

question 18

Multiple Choice

The formula for the spending multiplier when variable net exports are included in aggregate expenditures is

• A)1/(MPS + MPM)
• B)1/MPS
• C)MPS * MPM
• D)1/(MPC * MPM)
• E)1/(1 - MPC - MPM)

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Definitions:

Economies Of Scale

The reduction in cost per unit of goods or services produced as the scale of output increases.

World Price

The international market price of a commodity, determined by global supply and demand conditions.

Per-Unit Tariff

A specific tax levied on each unit of a good imported into a country, as opposed to a percentage of the value.

Imported Good

A product or service brought into one country from another country in a legitimate fashion, typically for use in trade.