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 introduces the marginal propensity to import (MPM). The correct multiplier formula incorporates MPM, resulting in the formula:

rac{1}{1-(MPC-MPM)}

This captures the net effect of consumption and imports on the multiplier effect, making Option A the accurate representation.