Question

which one of the following statement is correct
(1) a decrease in net exports will decrease the equilibrium level of income
(2) an increase in the tax rate will increase the size of the multiplier
(3) a change in the tax rate has no impact on the size of the multiplier
(4) an increase in net exports will decrease the equilibrium level of income

Answer 1

correct statement: (1) a decrease in net exports will decrease the equilibrium level of income.

a decrease in net exports, that is, a reduction in exports or an increase in imports, reduces total expenditures and reduces GDP.