Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that ..."its clothing factories have been exposed to frontal competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume ..."
Www)ft.com, 3/13/2006
Suppose real GDP is $14 billion, exports total $2 billion and the multiplier is 4. If exports decline by $600,000,000, real GDP in Mauritius will

Question

Quizplus · Accepted Answer

The multiplier effect suggests that a decrease in exports of $600,000,000 will lead to a decrease in real GDP of 4 times that amount, or $2.4 billion. Therefore, the correct answer is B, a decrease of $2.4 billion.

Mauritius, an Island Off the Coast of Africa, Competes with Other