The only change which happened between the previous and the current year is that

Question

The only change which happened between the previous and the current year is that while in the previous year all of the 100 million worth of imports were used for consumption, now all imports are directed exclusively to investment . Therefore this will affect the national account of the current year by:

(a) A decrease in consumption by a 100 million and an increase in investment by 100 million; (b) A decrease in consumption by 100 million times the multiplier and an equivalent increase in investment; (c) A decrease in consumption by 100 million times the multiplier and an increase in investment by 100 million; (d) No change at all.

Explanation / Answer

(a) A decrease in consumption by a 100 million and an increase in investment by 100 million;

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