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Figure: Circular-Flow Model
-(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in exports, which of the following is likely to happen?
A)a decrease in the nominal GDP
B)a decrease in the real GDP
C)a decrease in the unemployment rate
D)a decrease in the inflation rate

Question

Use the following to answer questions :
Figure: Circular-Flow Model 
-(Figure: Circular-Flow Model) Look at the figure Circular-Flow Model. If the circular-flow model is in equilibrium (the sum of money flowing into each box is equal to the sum of the money flowing out of it) and there is an increase in exports, which of the following is likely to happen?
A)a decrease in the nominal GDP 
B)a decrease in the real GDP 
C)a decrease in the unemployment rate 
D)a decrease in the inflation rate

Quizplus · Accepted Answer

An increase in exports leads to higher production to meet foreign demand, which typically results in more jobs and thus a decrease in the unemployment rate.

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