Question

if marginal propensity to import is 0.1 and the marginal propensity to consume is 0.7, the value of income multiplier will be?

Answer 1

The multiplier effect comes about because injections of new demand for goods and services into the circular flow of income stimulate further rounds of spending – in other words “one person’s spending is another’s income”

This can lead to a bigger eventual final effect on output and employment