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Question

Explain how each will impact the size of autonomous expenditure multiplier, other variables constant.

(a) Decrease in marginal propensity to consume
(b) Decrease in marginal propensity to import
8 years ago

Answers

bobpursley
multilier= 1/(1-MPC+MPI)

so if mpC decreases, the denominator gets larger, so the multipler goes down.
If the mpi decreases, the denominator gets larger, and the multilier increases.

8 years ago

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