Suppose Policy Makers Pass a Budget That Results in a Tax

Multiple Choice

Suppose policy makers pass a budget that results in a tax cut. This tax cut will have a greater impact on net exports when:

A) investment is unaffected by changes in income.
B) the sensitivity of investment to income is smaller.
C) the marginal propensity to import is larger.
D) the economy is closed.
E) the marginal propensity to import is smaller.