[HSC 2014] What is the increase in exports? (1 Viewer)

[andypandiiee]

Struggling to find the answer for this... any help? Thanks.

 

[Ekman]

You calculate the Multiplier:

MPC = Change in Consumption / Change in income
MPC = 40/50 = 0.8
K = 1/(1-MPC) = 1/0.2
(Change in exports) * K = Change in income *The reason why I say change in exports and not investment, is because they are both considered the same thing when you look it in terms of money flowing in the circular flow of income*
(Change in exports)/0.2 = 100
Change in exports = 20
Therefore A

 

[andypandiiee]

You calculate the Multiplier:

MPC = Change in Consumption / Change in income
MPC = 40/50 = 0.8
K = 1/(1-MPC) = 1/0.2
(Change in exports) * K = Change in income *The reason why I say change in exports and not investment, is because they are both considered the same thing when you look it in terms of money flowing in the circular flow of income*
(Change in exports)/0.2 = 100
Change in exports = 20
Therefore A

Thanks man