An increase in real net exports leads to an increase in real GDP. Further
A) real consumption spending and real saving increase.
B) real consumption spending increases but real saving does not change.
C) real consumption spending increases while real investment spending decreases.
D) real government spending decreases to offset the increase in real net exports.

Question

Quizplus · Accepted Answer

An increase in real net exports contributes to an increase in real GDP through the expenditure approach, where GDP = C + I + G + (X-M). As real GDP increases, it typically leads to higher income levels, which can boost both real consumption spending and real saving, assuming the marginal propensity to consume and save are positive.

An Increase in Real Net Exports Leads to an Increase