When Australian real GDP increases,Australian imports
A)increase by more than the change in real GDP.
B)increase by the same amount.
C)decrease by the same amount.
D)increase by less than the change in real GDP.
E)decrease by less than the change in real GDP.

Question

Quizplus · Accepted Answer

When real GDP increases, the income and wealth of Australian consumers also increase. This leads to an increase in their purchasing power and a higher demand for imported goods. However, Australian exports are also likely to increase due to a competitive exchange rate and strong demand from other countries. As a result, the increase in imports is likely to be less than the increase in real GDP.

When Australian Real GDP Increases,Australian Imports