What effect does an increase in exports have?
A)It leads to an even larger increase in equilibrium income.
B)It leads to an even larger decrease in equilibrium income.
C)It leads to a smaller increase in equilibrium income.
D)It leads to a smaller decrease in equilibrium income.

Question

Quizplus · Accepted Answer

An increase in exports leads to an increase in aggregate demand. This, in turn, results in a multiplier effect on the economy, causing an even larger increase in equilibrium income due to the additional spending and income generated through the circular flow of income.

What Effect Does an Increase in Exports Have