<p>multiplier =1/(1−MPC) holds for a simple closed economy without taxation. </p>

<p>multiplier =1/(MPS+MPM+MPT) holds in an economy that is open and with taxation as a function of income/output. </p>

<p>Both are different economies and therefore the formulas cannot be equated to arrive at your conclusion.</p>

CC BY-SA 4.0
2018-05-29T15:41:28.953Z
2018-05-29T15:41:28.953Z
Rahul
<p>Hint. Is it always the case that MPC + MPS = 1?  Or does this hold only in a certain type of model with assumptions that simplify from reality?</p>

CC BY-SA 3.0
2018-04-23T13:13:34.853Z
2018-04-23T13:13:34.853Z
Adam Bailey
<p>the multiplier $= \frac{1}{(1-MPC)}$</p>

<p>and </p>

<p>the multiplier $= \frac{1}{MPW} = \frac{1}{MPS+MPM+MPT}$.</p>

<p>Now since $MPC + MPS = 1$ it follow that $1-MPC = MPS$,</p>

<p>therefore the multiplier = $\frac{1}{(MPS+MPM+MPT)} = \frac{1}{MPS}$</p>

<p>and so $MPS = MPS + MPM + MPT$</p>

<p>from this, we can see that $MPM = -MPT$</p>

<p>Therefore, Marginal Propensity to Import = negative Marginal Propensity to Tax</p>

<p>I am unable to see what the flaw in the logic is or if there is something I am missing. Any explanation or help would be great.</p>

CC BY-SA 3.0
2018-04-29T13:09:48.333Z
It would be nice to define all the MP terms, such as MPC, MPS, MPT...
emeryville
<marginal>
Does the Marginal Propensity to Import = negative Marginal Propensity to Tax?
Fred Wieser
# Does the Marginal Propensity to Import = negative Marginal Propensity to Tax?

(Asked by: username_0 on 2018-04-22)

the multiplier $= \frac{1}{(1-MPC)}$

and

the multiplier $= \frac{1}{MPW} = \frac{1}{MPS+MPM+MPT}$.

Now since $MPC + MPS = 1$ it follow that $1-MPC = MPS$,

therefore the multiplier = $\frac{1}{(MPS+MPM+MPT)} = \frac{1}{MPS}$

and so $MPS = MPS + MPM + MPT$

from this, we can see that $MPM = -MPT$

Therefore, Marginal Propensity to Import = negative Marginal Propensity to Tax

I am unable to see what the flaw in the logic is or if there is something I am missing. Any explanation or help would be great.

**Tags:** marginal
> **Comments:**
> **username_1**: It would be nice to define all the MP terms, such as MPC, MPS, MPT...  

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## 2 answers

### Answer by username_2 on 2018-05-29. Score: 0

multiplier =1/(1−MPC) holds for a simple closed economy without taxation.

multiplier =1/(MPS+MPM+MPT) holds in an economy that is open and with taxation as a function of income/output.

Both are different economies and therefore the formulas cannot be equated to arrive at your conclusion.


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### Answer by username_3 on 2018-04-23. Score: 0

Hint. Is it always the case that MPC + MPS = 1? Or does this hold only in a certain type of model with assumptions that simplify from reality?


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