If the marginal propensity to save is 0.3 and the marginal propensity to import is 0.1, and the government increases expenditures by Rs. 10 billion, ignoring foreign-income repercussions, by how much will GDP rise?
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Keynesian cross and the multiplier has come up 167 times in 7 exams since 2006.
This question is on The open-economy multiplier, part of Keynesian cross and the multiplier in Macroeconomics.
How imports leak spending abroad and shrink the multiplier.
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Question from the DSE 2019 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.