Suppose that a change in consumer preferences leads to a $50 billion decrease in net exports.
If the value of the multiplier is 3, what is the size of the shift in the aggregate demand after
The multiplier process works through the economy?
A) $150 billion
B) $100 billion
C) Less than $50 billion
D) Cannot be determined without information on exports

Question

Quizplus · Accepted Answer

The decrease in net exports leads to a decrease in aggregate demand equal to the initial $50 billion. The multiplier process magnifies this impact, so the total shift in aggregate demand will be equal to the initial change in net exports multiplied by the multiplier (3): $50 billion x 3 = $150 billion. Therefore, the size of the shift in aggregate demand will be $150 billion, which is closest to option B.

Suppose That a Change in Consumer Preferences Leads to a $50