If net exports decrease by $10 billion and the MPC is 0.9,what is the ultimate change in GDP?
A) $100 billion
B) -$10 billion
C) $10 billion
D) -$100 billion
E) -$9 billion

Question

Quizplus · Accepted Answer

The formula for calculating the overall impact of changes in net exports on GDP is:

change in GDP = change in net exports x (1/MPC)

Plugging in the given values, we get:

change in GDP = (-$10 billion) x (1/0.9)

change in GDP = -$100 billion

Therefore, the correct answer is D) -$100 billion.

If Net Exports Decrease by $10 Billion and the MPC