Which of the formulas, below, represents the multiplier in an open economy? (Choose Option A or Option B and write your answer in the space provided) - Leaving Cert Economics - Question 9 - 2008

In an open economy, there are imports which impact the marginal propensity to consume (MPC) and the marginal propensity to import (MPM). The correct formula for the multiplier in this context is given by Option A:

$\frac{1}{1 - (MPC - MPM)}$

This accounts for the effect of imports, making it suitable for open economies.