For a small open economy, assume that the marginal propensity to import is 0.3, and that interest rates, exchange rates, and the price level are all constant. If an increase of $10 billion in government spending results in an increase of $6 billion in imports, then
A. real domestic investment decreases by $4 billion.
B. real gross domestic product (GDP) increases by $4 billion.
C. taxes increase by $10 billion.
D. the spending multiplier is 2.
Answer: D
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