All else equal, in an open economy, how would an increase in the marginal propensity to import (mpi) affect the government purchases multiplier?

a. it increases the multiplier only if marginal propensity to consume (mpc) is higher than the tax rate.

b. it increases the multiplier only if marginal propensity to consume (mpc) is greater than marginal propensity to import (mpi).

c. it decreases the government purchases multiplier

d. it has no effect

e. it increases the government purchases multiplier

E. it increases the government purchases multiplier

Explanation:

Govt multiplier = ΔY/ΔG = 1/(1-mpc*(1-t)+mpi)

All else equal. An increase in mpi will increase the denominator in the above equation. This will reduce the value of RHS. Thus as mpi increases , govt multiplier decreases, because more of the spending is diverted to imports and domestic production doesnot get boost.

being born in poverty would limit the people's chances, opportunities and benefits.

this happen because of several things, such as:

- poor people tend to gain less access to good education and nutrition. this mean that their chance to obtain high paying jobs would also be limited.

- poor people tend to socialize with other poor people while the rich tend to socialize with other rich people. this means that simply throguh their social circle, rich people would have more business opportunities compared to the poor people.

- rich people tend to have more capital in their disposal. this would benefit them in business since it is far easier for them to fund their business operation compared to poor people.