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Which of the following statements is correct? Group of answer choices a, An increase in exports...

Which of the following statements is correct?

Group of answer choices

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.

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Homework Answers

Answer #1

Aggregate expenditure is a sum of consumption , investment , government expenditure and net exports .

AE = C + I + G + NX

Also NX = X- M , where X = exports and M = Imports

Also , Y = AE

Y =C + I + G + X - M

Hence if exports increases , then net exports will also rise which then lead to aggregate expenditure increases and which further results in increase of equilibrium GDP . If imports increases , then net exports will also fall which then lead to aggregate expenditure decrease and which further results in decrease of equilibrium GDP.

Hence ( A ) part is a correct answer

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