Multiple Choice Questions on Assume that net exports increase by Rs 100 crores Equilibrium Real GDP will rise by more than Rs 100........... for UPSC Civil Services Examination (General Studies) Preparation

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Multiple Choice Questions

Assume that net exports increase by Rs 100 crores Equilibrium Real GDP will rise by more than Rs 100...........

Economic Affairs Growth and Indicators
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    Assume that net exports increase by Rs.100 crores. Equilibrium Real GDP will rise by more than Rs. 100 crores. Which of the following best explains the multiplier effect?

    an increase in net exports appreciates the dollar causing a further increase in net exports

    Incorrect Answer

    An increase in net exports causes an increase in tax revenues which increases government spending

    Incorrect Answer

    an increase in net exports increases income causing an increase in induced consumption

    Correct Answer

    An increase in net exports causes an increase in the money supply

    Incorrect Answer
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    Explanation:

    Multiplier Effect is an increase in net exports increases income causing an increase in induced consumption.

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