If net exports increase by 250 and the mpc is 0.75,equilibrium aggregate output increases by
A)250.
B)500.
C)750.
D)1,000.

Name: If net exports increase by 250 and the mpc is 0.75,equilibrium aggregate output increases by A)250. B)500. C)750. D)1,000.
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Question

Quizplus · Accepted Answer

The multiplier effect is calculated as 1/(1-mpc), which in this case is 1/(1-0.75) = 4. Therefore, an increase in net exports of 250 leads to an increase in equilibrium aggregate output of 250 * 4 = 1,000.

If Net Exports Increase by 250 and the Mpc Is