The fact that imports increase as real GDP increases implies that imports are part of
A)induced expenditure.
B)autonomous expenditure.
C)equilibrium expenditure.
D)marginal expenditure.
E)consumption expenditure.

Question

Quizplus · Accepted Answer

Induced expenditure refers to the additional spending that occurs as a result of an increase in income. As real GDP increases, incomes rise, which in turn leads to an increase in consumption expenditures. Since imports are considered a component of consumption expenditures, it follows that as real GDP increases, imports will also increase. Thus, imports are part of induced expenditure.

The Fact That Imports Increase as Real GDP Increases Implies