What is the effect of net exports, either positive or negative, on equilibrium GDP?
What will be an ideal response?
Positive net exports increase aggregate expenditures beyond what they would be in a private closed economy and thus have an expansionary effect. The multiplier effect also is at work. Positive net exports will lead to a positive change that is greater than the amount of the initial change. Negative net exports decrease aggregate expenditures beyond what they would be in a private closed economy and thus have a contraction effect. The multiplier effect also is at work here. Negative net exports lead to a negative change in equilibrium GDP that is greater than the initial change.
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On the island country of Sunshine where the unit of currency is fish, net exports are 50 fish, saving is 250 fish, net taxes are 100 fish, and the government budget deficit is 175 fish. The private sector has a ________
A) deficit of 125 fish B) surplus of 125 fish C) deficit of 225 fish D) surplus of 225 fish
The method used by society to produce and distribute goods and services
a. standard of living b. privatize c. economic system d. self-interest e. factor payments