A reduction in the marginal propensity to import will cause
A) the multiplier to increase and a given change in government spending (G) to have a larger effect on domestic output.
B) the multiplier to increase and a given change in government spending (G) to have a smaller effect on domestic output.
C) the multiplier to decrease and a given change in government spending (G) to have a larger effect on domestic output.
D) the multiplier to decrease and a given change in government spending (G) to have a smaller effect on domestic output.
Question 2
The Phillips curve shows that when the unemployment rate is higher than the natural rate,
A) inflation is higher than expected.
B) inflation is lower than expected.
C) policy rate is higher than expected.
D) policy rate is lower than expected.
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