Marginal propensity to import

The marginal propensity to import (MPM) refers to the change in import expenditure that occurs with a change in disposable income (income after taxes and transfers). For example, if a household earns one extra dollar of disposable income, and the marginal propensity to import is 0.2, then of that dollar, the household will spend 20 cents of that dollar on imported goods and services.

Mathematically, the marginal propensity to import (MPM) function is expressed as the derivative of the import (I) function with respect to disposable income (Y).

$MPM=\frac{dI}{dY}$

In other words, the marginal propensity to import is measured as the ratio of the change in imports to the change in income, thus giving us a figure between 0 and 1.

Imports are also considered to be automatic stabilisers that work to lessen fluctuations in real GDP.

The UK government assumes that UK citizens have a high marginal propensity to import and thus will use a decrease in disposable income as a tool to control the current account on the Balance of Payments.

See also

• Marginal propensity to save
• Marginal propensity to consume
• Automatic stabiliser
• Multiplier Model

This article related to macroeconomics is a stub. You can help Wikipedia by expanding it.v · Categories: Macroeconomics Macroeconomics stubs Wikimedia Foundation. 2010. Игры ⚽ Поможем написать курсовую Libavcodec Wakadoshiyori Look at other dictionaries: marginal propensity to import — UK US noun [S] (ABBREVIATION MPM, ABBREVIATION MPI) ► ECONOMICS the degree to which a country changes how much it imports in relation to a change in GDP (= national income) …   Financial and business terms Marginal propensity to save — The marginal propensity to save (MPS) refers to the increase in saving (non purchase of current goods and services) that results from an increase in income i.e. The marginal propensity to save might be defined as the proportion of each additional …   Wikipedia propensity — pro‧pen‧si‧ty [prəˈpensti] noun propensities PLURALFORM [countable] 1. a tendency to behave in a particular way: • The plastic bodied car s propensity to catch fire killed demand. 2. marginal propensity to consume ECONOMICS the relationship… …   Financial and business terms Fiscal multiplier — This article is about the effect of spending on national income. For the multiplier effect in banking, see Fractional reserve banking. In economics, the fiscal multiplier is the ratio of a change in national income to the change in government… …   Wikipedia Automatic stabiliser — In macroeconomics automatic stabilisers work as a tool to dampen fluctuations in real GDP without any explicit policy action by the government. The size of the government deficit tends to increase as a country enters recession, which helps keep… …   Wikipedia Spending multiplier — In economics, the multiplier effect refers to the idea that an initial spending rise can lead to an even greater increase in national income. In other words, an initial change in aggregate demand can cause a further change in aggregate output for …   Wikipedia Complex multiplier — The complex multiplier is the multiplier principle in keynesian economics (formulated by John Maynard Keynes). The multiplier is a rather simplistic version of this. It applies to any change in autonomous expenditure, in other words, a change in… …   Wikipedia MPI — UK US noun [S] ECONOMICS ► ABBREVIATION for MARGINAL PROPENSITY TO IMPORT(Cf. ↑marginal propensity to import) …   Financial and business terms MPM — UK US noun [S] ECONOMICS ► ABBREVIATION for MARGINAL PROPENSITY TO IMPORT(Cf. ↑marginal propensity to import) …   Financial and business terms Automatic stabilizer — In macroeconomics automatic stabilizers work as a tool to dampen fluctuations in real GDP without any explicit policy action by the government. It is a government program that changes automatically depending on GDP and a person’s income,[1] and… …   Wikipedia 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”