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1 Assuming no change in other variables, if investment expenditure increases by $300 billion and imports increase by $150 billion, then GDP Select one: a
1
Assuming no change in other variables, if investment expenditure increases by $300 billion and imports increase by $150 billion, then GDP Select one: a. decreases by $50 billion. b. does not change. o c. increases by $150 billion. d. increases by $50 billion. e. decreases by $150 billion.
2
Assuming no change in other variables, if investment expenditure increases by $300 billion and imports increase by $150 billion, then GDP Select one: a. decreases by $50 billion. b. does not change. o c. increases by $150 billion. d. increases by $50 billion. e. decreases by $150 billion.
Expert Solution
1
Correct option - (c) increases by $150 billion
As we know
GDP, Y = C + I + G + (X - M)
where
Y = GDP
C = Consumption
I = Investment
G = Government spending
X = export
M = import
In the GDP formula above considering all except I and M constant.
Y = 300 - 150
Y = $150 billion.
2
Answer is C GDP will increase by $ 150
GDP= C+ I+G+ (X-M)
= 0+ 300+0+(0-150)
= 300- 150
= $150 billions.
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