If adding net exports to C + I + G causes the expenditure line to shift up in a parallel way, it implies that
A)imports and exports are not sensitive to changes in income.
B)both exports and imports are sensitive to changes in income.
C)exports are sensitive to changes in income.
D)imports are sensitive to changes in income.
E)imports and exports have an uncertain effect on income.

Question

Quizplus · Accepted Answer

If adding net exports to C (consumption) + I (investment) + G (government spending) causes the expenditure line to shift up in a parallel way, it implies that imports and exports are not sensitive to changes in income. This is because a parallel shift suggests that the net exports component does not change with changes in income, indicating insensitivity.

If Adding Net Exports to C + I + G