� Average And Marginal Propensities To Import (Apm And Mpm)
Economics notes
� Average And Marginal Propensities To Import (Apm And Mpm)
➡️ Average Propensity to Consume (APC): This is the ratio of total consumption to total disposable income. It measures the average amount of consumption out of every dollar of disposable income.
➡️ Marginal Propensity to Consume (MPC): This is the ratio of the change in consumption to the change in disposable income. It measures the amount of additional consumption that results from an additional dollar of disposable income.
➡️ Both APC and MPC are important economic concepts that help economists understand how changes in disposable income affect consumption. They are also used to measure the impact of fiscal and monetary policies on the economy.
What is the difference between average and marginal propensities to import?
The average propensity to import (APM) is the ratio of total imports to total income, while the marginal propensity to import (MPM) is the change in imports resulting from a change in income. APM measures the overall level of imports in an economy, while MPM measures the responsiveness of imports to changes in income.
How do average and marginal propensities to import affect the economy?
APM and MPM are important indicators of a country's trade balance and its dependence on foreign goods. A high APM indicates that a large portion of income is being spent on imports, which can lead to a trade deficit and a drain on the economy. A high MPM indicates that a small change in income can have a significant impact on imports, which can affect the balance of payments and exchange rates.
What factors influence the average and marginal propensities to import?
The APM and MPM are influenced by a variety of factors, including the level of income, the availability of domestic goods, the exchange rate, and government policies such as tariffs and subsidies. Higher income levels tend to increase both APM and MPM, while a strong domestic economy can reduce the need for imports. Changes in exchange rates can also affect the relative cost of imports, while government policies can either encourage or discourage imports.