Marginal Propensity to Import (MPM)

The marginal propensity to import (MPM) is the change in imports caused by a change in income. It is a measure of the sensitivity of imports to changes in income. The MPM is calculated as the change in imports divided by the change in income.

The MPM is an important concept in international trade because it helps to explain the relationship between imports and income. The MPM can be used to predict how changes in income will affect imports.

The MPM is also used to calculate the multiplier effect. The multiplier effect is the increase in output that results from an increase in spending. The MPM is one of the factors that determines the size of the multiplier effect.

The MPM can be positive or negative. A positive MPM means that imports increase when income increases. A negative MPM means that imports decrease when income increases.

The MPM is influenced by a number of factors, including the price of imports, the price of domestic goods, and the exchange rate.

The price of imports is an important factor because it affects the relative cost of imported goods compared to domestic goods. If the price of imports increases, consumers are more likely to buy domestic goods instead. This will lead to a decrease in imports.

The price of domestic goods is also an important factor because it affects the relative cost of imported goods compared to domestic goods. If the price of domestic goods increases, consumers are more likely to buy imported goods instead. This will lead to an increase in imports.

The exchange rate is another important factor because it affects the relative cost of imported goods compared to domestic goods. If the exchange rate appreciates, imported goods become more expensive. This will lead to a decrease in imports.

The MPM is an important concept in international trade. It helps to explain the relationship between imports and income and can be used to predict how changes in income will affect imports. The MPM is also used to calculate the multiplier effect.