<h2>Marginal Propensity to Import (MPM)</h2>
<p>The <strong>Marginal Propensity to Import (MPM)</strong> is a key concept in international trade theory, representing the proportion of an increment in income that is spent on imported goods and services. It's a crucial factor in understanding the impact of income changes on a country's trade balance.</p>

<h2>How It Works</h2>
<p>The MPM is calculated as the change in imports divided by the change in income. Mathematically, it's expressed as:</p>
<p><strong>MPM = ΔImports / ΔIncome</strong></p>
<p>For instance, if a country's imports increase by $100 million following a $500 million increase in income, the MPM would be:</p>
<p><strong>MPM = $100 million / $500 million = 0.2 or 20%</strong></p>

<h2>Why It Matters for Traders</h2>
<p>MPM is vital for traders and investors for several reasons:</p>
<ul>
  <li>It helps forecast changes in trade balances, which can influence a country's currency and interest rates.</li>
  <li>It can indicate a country's sensitivity to income changes, which may affect its economic growth and stock market performance.</li>
  <li>It can provide insights into consumer behavior and preferences, which may impact specific sectors or industries.</li>
</ul>

<h2>Example</h2>
<p>Consider a country with an MPM of 0.3. If its income increases by $1 billion, imports are expected to rise by:</p>
<p><strong>$1 billion * 0.3 = $300 million</strong></p>

<h2>Key Takeaways</h2>
<ul>
  <li>The Marginal Propensity to Import (MPM) measures the proportion of income spent on imports.</li>
  <li>MPM is a crucial factor in understanding a country's trade balance and economic sensitivity to income changes.</li>
  <li>Traders and investors can use MPM to inform their decisions about currencies, interest rates, and specific sectors.</li>
</ul>