If the marginal propensity to import decreases:the demand (ZZ) line to become steeper and a given change in governmentspending to have a larger effect on outputthe demand (ZZ) line to become steeper and a given change governmentspending to have no effect on outputthe demand (ZZ) line to become steeper and a given change in governmentspending to have a smaller effect on outputO the demand (ZZ) line to become flatter and a given change in governmentspending to have a larger effect on outputthe demand (ZZ) line to become flatter and a given change in governmentspending to have a smaller effect on output

The slope of the imports line is also referred to as the marginal propensity to import and it is…

Answered: If the marginal propensity to import…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter4: Estimating Demand

Section: Chapter Questions

Problem 6E

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In an economy with lump-sum taxes and no international trade, if the marginal propensity to consume is 0.8, which of the following is true? A. When consumption increases by RM5, investment increases by a maximum of RM1. B. When consumption increases by RM5, savings increase by a maximum of RM1. C. When investment increases by RM1, income increases by a maximum of RM5. D. When investment increases by RM1, consumption increases by a maximum of RM5.
Suppose that the government grants investment tax credits without changing the overall tax revenue T. In this case, the investment demand function will shift _____, but in equilibrium, the quantity demanded of I will _____ because r will increase.
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