Higher export demand __________ output and a higher MPZ __________ output?
Correct answer: C. increase, reduces
- A. reduces, reduces
- B. reduces, increase
- C. increase, reduces
- D. increases, increases
Explanation
Higher export demand is an injection that raises aggregate demand and output. A higher marginal propensity to import increases leakage from the spending multiplier, reducing the resulting increase in output.
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