A hypothetical open economy has a marginal propensity to import (MPI) equal to 0.2 and a marginal propensity to consume equal to 0.7 . Assume that the economy is initially in equilibrium. What is the marginal propensity to save of this economy?

Relative PPP indicates that

A) the exchange rate between any two currencies is equal to the ratio of their price indexes. B) the same good sells for the same price internationally. C) the percentage change in the exchange rate is equal to the inflation differential between the domestic and foreign country. D) relative prices determine exchange rates.

On average, the greater the unexpected decline in aggregate demand

A) the weaker is the resulting deflation. B) the greater is the resulting deflation. C) the greater is the resulting inflation. D) the greater is the rise in the price level.