Holding other expenditures constant, if imports fall by $20 billion and exports fall by $10 billion, then GDP
A) rises by $10 billion.
B) falls by $10 billion.
C) falls by $30 billion.
D) rises by $30 billion.

Question

Quizplus · Accepted Answer

When imports fall by $20 billion and exports fall by $10 billion, the net exports increase by $10 billion ($20 billion decrease in imports minus $10 billion decrease in exports), which leads to a $10 billion increase in GDP, holding other expenditures constant.

Holding Other Expenditures Constant, If Imports Fall by $20 Billion