Suppose There Is an Increase in Exports

question 99

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)Autonomous expenditure increases, induced expenditure increases, real GDP increases, and the price level rises.
• B)Induced expenditure increases, autonomous expenditure increases, real GDP increases, and consumption increases.
• C)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.
• D)Induced expenditure increases, real GDP increases, autonomous expenditure increases, real GDP increases more, autonomous expenditure increases again, etc.
• E)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.

---

Definitions:

Government Size

A measure of how large or expansive a government is, often in terms of spending, taxation, and regulation.

Protective Functions

Measures implemented to safeguard consumers, employees, and businesses against harm or exploitation.

Federal Spending

The total amount of money spent by the national government on various programs, services, and initiatives.

Borrowing

The act of obtaining funds from another party with the promise to repay the principal amount along with interest or dividends.