You are an analyst preparing a forecast of the effects of macroeconomic changes in the economy. What happens to prices and GDP when exports increase due to rising foreign incomes?
A)Both prices and GDP increase.
B)Both prices and GDP decrease.
C)Prices increase, and GDP decreases.
D)Prices decrease, and GDP increases.

Question

Quizplus · Accepted Answer

When exports increase due to rising foreign incomes, it leads to an increase in demand for the country's goods and services. This increased demand boosts economic activity, leading to higher GDP. Additionally, the increased demand can also lead to higher prices, as producers may raise prices in response to the higher demand.

You Are an Analyst Preparing a Forecast of the Effects