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Figure: Circular-Flow Model
-(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it), which of the following is likely to happen if there is a decrease in imports?
A)an increase in the nominal GDP
B)a decrease in the nominal GDP
C)an increase in the unemployment rate
D)an increase in the nominal GDP, a decrease in the nominal GDP, and an increase in the unemployment rate

Question

Use the following to answer questions :
Figure: Circular-Flow Model 
-(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it), which of the following is likely to happen if there is a decrease in imports?
A)an increase in the nominal GDP 
B)a decrease in the nominal GDP 
C)an increase in the unemployment rate 
D)an increase in the nominal GDP, a decrease in the nominal GDP, and an increase in the unemployment rate

Quizplus · Accepted Answer

If there is a decrease in imports, it means there is an increase in domestic production and consumption. This will lead to an increase in the flow of money in the economy, which will result in an increase in the nominal GDP.

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