Exam 24: Variable Net Exports Revisited

An economy that engages in international trade will have a steeper aggregate expenditure line than one that is the same in all other respects,except for the absence of international trade.

If variable net exports increase by the same amount at every level of income,then there is an upward and parallel shift of the net export line.

When variable net exports are added to the aggregate expenditure line,the resulting planned aggregate expenditure line becomes

The spending multiplier with variable net exports is

The marginal propensity to import is defined as

If the marginal propensity to import (MPM)equals 0.10 and the multiplier equals 5.0,the marginal propensity to consume must equal

The formula for the spending multiplier in model with variable net exports trade equals 1/(MPS + MPM).

A more realistic approach has net exports varying __________ with income.

Imports increase as domestic income increases.

If net exports increase by $400 billion at every level of income,the aggregate expenditure line will

When variable net exports are included in aggregate expenditures,the two leakages from the circular flow are

If the MPS = 0.25 and the MPM = 0.25,the spending multiplier with net exports equals

Adding net exports to aggregate expenditure always

If the marginal propensity to consume (MPC)equals 0.75 (3/4)and the multiplier equals 2.0,the marginal propensity to import (MPM)must equal

Exhibit 10-7 -In Exhibit 10-7,the marginal propensity to consume is

If net exports increase by $450 billion at every level of income,equilibrium real GDP demanded will

If the MPC equals 0.7 and the MPM equals 0.10,then the spending multiplier equals

When net exports are included in the aggregate expenditure function,the spending multiplier

The larger the marginal propensity to import,the __________ during each round of spending and __________ the resulting spending multiplier.

In a model which includes variable net exports,the spending multiplier equals 1/(MPS + MPM).