Answer :

Marginal propensity to import is the change in import induced by change in income of the country. It is the degree to which country changes its import in relation to change in GDP.

Given –

M = 60 + 0.06Y

It means marginal propensity to import is 0.06 which reflects that with 1 Rupee increase in income the import will increase with 0.06.

The marginal propensity to import affects the aggregate demand function negatively. With increase in income the aggregate demand decreases because additional income is spent on foreign goods and not on domestic products.

Rate this question :

How useful is this solution?
We strive to provide quality solutions. Please rate us to serve you better.
Try our Mini CourseMaster Important Topics in 7 DaysLearn from IITians, NITians, Doctors & Academic Experts
Dedicated counsellor for each student
24X7 Doubt Resolution
Daily Report Card
Detailed Performance Evaluation
view all courses

Primary deficit eEconomics - Board Papers

Foreign exchange Economics - Board Papers

(a) Define “TradeEconomics - Board Papers