Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars. Other things equal, an increase in an economy's exports will:
A)lower the marginal propensity to import.
B)have no effect on domestic GDP because imports will change by an offsetting amount.
C)decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP.
D)increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.

Question

Complete the following table and answer the next question(s) on the basis of the resulting data.All figures are in billions of dollars.  Other things equal, an increase in an economy's exports will:
A)lower the marginal propensity to import. 
B)have no effect on domestic GDP because imports will change by an offsetting amount. 
C)decrease its domestic aggregate expenditures and therefore decrease its equilibrium GDP. 
D)increase its domestic aggregate expenditures and therefore increase its equilibrium GDP.

Quizplus · Accepted Answer

The table shows that an increase in exports leads to an increase in domestic expenditures and GDP (shown by the increase in the "GDP" column). This is because exports are part of aggregate demand, which is composed of consumption, investment, government spending, and net exports (exports - imports). An increase in exports leads to an increase in net exports, which increases aggregate demand and equilibrium GDP.

Complete the Following Table and Answer the Next Question(s) on the Basis