Question

when an increase in net exports increases the income of domestic consumers, and those consumers spend some of that increase in income on additional consumer goods, we have seen a demonstration of . a. the multiplier effect b. the investment accelerator c. the export effect d. supply-side economics e. none of the answer choices

Answer 1

An increase in net exports leading to higher domestic consumer income and subsequent spending on consumer goods demonstrates the multiplier effect, which results in a larger change in national income.

Step-by-step explanation:

When an increase in net exports increases the income of domestic consumers, and those consumers spend some of that increase in income on additional consumer goods, it is a demonstration of the multiplier effect. The multiplier effect refers to how an initial change in spending (such as an increase in net exports) leads to a larger change in national income. Specifically, in the context of aggregate demand, this multiplier effect can shift the aggregate demand curve by an amount equal to the initial change in net exports times the multiplier.

Answer 2

When an increase in net exports increases the income of domestic consumers and those consumers spend some of that increase on additional consumer goods, this demonstrates the multiplier effect. Therefore, the correct option is a. the multiplier effect.

Step-by-step explanation:

When an increase in net exports increases the income of domestic consumers and those consumers spend some of that increase on additional consumer goods, this demonstrates the multiplier effect.

The multiplier effect refers to the idea that an initial change in expenditure or investment can lead to a larger final increase in national income or output. In this scenario, the increase in net exports causes an increase in income, which leads to additional spending on consumer goods, further boosting the economy.

To illustrate, let's say a country's net exports increase by $100 million. This increase in net exports increases the income of domestic consumers by $100 million. If consumers spend a portion of this increase on consumer goods, such as buying cars, the car manufacturers will experience an increase in demand. To meet this increased demand, the car manufacturers may need to hire more workers and increase production, which leads to a further increase in income and spending in the economy.