In the Short Run, a Decrease in Net Exports Causes

question 100

Multiple Choice

In the short run, a decrease in net exports causes

• A) an increase in real GDP and the price level.
• B) increase in real GDP and a decrease in the price level.
• C) decrease in real GDP and an increase in the price level.
• D) a decrease in real GDP and the price level.

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Definitions:

Disposable Income

Income remaining after deduction of taxes and social security charges, available to be spent or saved as one wishes.

APC

Average Propensity to Consume, which measures the fraction of income that households spend on consumption rather than saving.

MPS

Stands for Marginal Propensity to Save, which is the ratio of the change in savings to the change in disposable income. It indicates how much of an additional income unit is saved rather than spent.

Capacity Utilization Rate

The percentage of an industry or economy's total potential output that is actually being realized at a given time.