How does leakage through imports in an open economy affect the multiplier's magnitude?

Multiple choice question for The National Economy. Select an option, then review the explanation below.

Explanation

Leakages such as imports reduce the overall spending within the domestic economy, which lowers the multiplier effect. Therefore, imports cause the multiplier to decrease.

Practice related questions from the same subject.

1.Which components determine the overall multiplier effect in an economy?
2.With fixed government expenditure and tax rates, during which economic phases does the government budget deficit increase and during which does it decrease?
3.What is the likely effect on economic output if the government raises taxes to fully cover an increase in its spending?
4.When households attempt to increase their savings, but equilibrium income shifts without any change in total savings, what economic concept does this illustrate?
5.How is the multiplier determined in economic terms?

How does leakage through imports in an open economy affect the multiplier's magnitude?

Explanation

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