If net exports decrease by 250 and the mpc is 0.75,equilibrium aggregate output
A)increases by 1,000.
B)increases by 750.
C)decreases by 750.
D)decreases by 1,000.

Question

Quizplus · Accepted Answer

The decrease in net exports reduces aggregate demand. With an MPC (marginal propensity to consume) of 0.75, the multiplier is 1/(1-MPC) = 4. Thus, a decrease of 250 in net exports leads to a 4 * 250 = 1,000 decrease in equilibrium aggregate output.

If Net Exports Decrease by 250 and the Mpc Is