Which of the following statements is correct?
A) An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP
B) An increase in exports and an increase in imports will both tend to increase the equilibrium GDP
C) An increase in exports and an increase in imports will both tend to decrease the equilibrium GDP
D) An increase in exports will tend to decrease, and an increase in imports will tend to increase, the equilibrium GDP

Question

Quizplus · Accepted Answer

An increase in exports will increase the GDP because it means more goods produced in the country are being sold abroad, which increases the income of producers, and increases overall spending in the economy. On the other hand, an increase in imports will decrease the GDP because it means more goods are being bought from abroad, which decreases the income of domestic producers, and decreases overall spending in the economy. Therefore, A is the correct statement.

Which of the Following Statements Is Correct