If the economy is operating below its capacity, an increase in net exports will increase real GDP. Like consumption and investment, net exports create domestic production.
It is difficult for a country to boost real GDP by increasing its tariffs during a global recession because this will induce retaliation from the trading partner, who tends to reduce imports from the domestic country. With retaliation in the picture, the reduced exports may be larger than the reduced imports, making net exports fall.
An investment schedule shows the amounts business firms collectively intend to invest - their planned investment - at each possible level of GDP. It does not change with GDP. An investment demand curve and the interest rate together determine the investment schedule. Investment demand is a function of interest rate.
Investment schedule differ from investment demand curve because investment schedule is constant and is a horizontal line with GDP on the horizontal axis (graph 1); whereas investment demand curve is a downward sloping line with interest rate on the vertical axis (graph 2).
Multiplier determines how much GDP will change in accordance with the change in spending, which depends on MPC. First we calculate the multiplier.
Then we calculate the change in real GDP.
Lastly we calculate the final level of real GDP, denoted by GDP'.