Suppose There Is an Increase in Exports

question 144

Multiple Choice

Suppose there is an increase in exports.Assuming the price level is held constant, which one of the following best describes the sequence of changes in the economy?

• A)Induced expenditure increases, real GDP increases, autonomous expenditure increases, real GDP increases more, autonomous expenditure increases again, etc.
• B)Induced expenditure increases, real GDP increases, autonomous expenditure increases, and the price level increases, lowering autonomous expenditure and real GDP increases by a smaller amount.
• C)Induced expenditure increases, autonomous expenditure increases, real GDP increases, and consumption increases.
• D)Autonomous expenditure increases, real GDP increases, induced expenditure increases, real GDP increases more, induced expenditure increases again, and the process continues until equilibrium expenditure is reached.
• E)Autonomous expenditure increases, induced expenditure increases, real GDP increases, and the price level rises.

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Definitions:

Time Preference

An individual's preference for receiving goods, services, or money now rather than in the future, often influencing economic decisions.

Inflation Rate

The percentage increase in the general level of prices for goods and services over a period, reducing purchasing power.

Money Rate

Refers to the interest rate or the cost of borrowing money, which can influence economic activity by affecting consumer spending and investment.

Real Rate

The interest rate adjusted for inflation, providing a more accurate measure of the return on investment.