Answer to Question #58810 in Macroeconomics for Hannah

Question #58810
Assume exports increase by $500 million and imports decrease by $300 million and that the MPC is .75. What's the effect on real GDP? Answer Choices: a. $3.2 billion increase b. $800 million increase c. $200 million decrease d. $4 billion increase
Expert's answer
b. $800 million increase
GDP increasing=(Export-Import)*multiplicator of expenses.
multiplicator of expenses=1/(1-MPC)
GDP increasing=(500-300)/(1-0.75)=800

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