Other things equal, an increase in an economy's exports will:
A) lower the marginal propensity to import.
B) have no effect on equilibrium GDP because imports will change by an offsetting amount.
C) decrease its aggregate expenditures and therefore decrease its equilibrium GDP.
D) increase its aggregate expenditures and therefore increase its equilibrium GDP.

Question

Quizplus · Accepted Answer

An increase in exports leads to an increase in aggregate expenditures, as exports are a component of aggregate demand. This, in turn, increases the equilibrium GDP of the economy.

Other Things Equal, an Increase in an Economy's Exports Will