Other things equal, the effect of a downward shift of the economy's net export schedule on equilibrium GDP will be similar to a(n):
A)rightward shift in the investment-demand schedule.
B)downward shift in the consumption schedule.
C)upward shift in the consumption schedule.
D)upward shift in the investment schedule.

Question

Quizplus · Accepted Answer

A downward shift in the net export schedule means that the economy is exporting less and importing more, which reduces overall spending in the economy. This reduction in spending is similar to a downward shift in the consumption schedule, as both lead to a decrease in GDP. A rightward shift in the investment-demand schedule or an upward shift in the consumption schedule would increase GDP, while an upward shift in the investment schedule would indicate increased investment, but it may or may not lead to an increase in overall output depending on other factors.

Other Things Equal, the Effect of a Downward Shift of the Economy's