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In recent years the U.S Imports have been significantly affected by the U.S Real GDP. This can be understood better by noting the formula used to find the relationship between real GDP and Imports. The marginal propensity of imports is a minor change in real GDP and is found out through the formula of the change of the real GDP divided by the alteration in imports. Hence if there is a rise of real GDP by $1 trillion and it leads to rise of $0.25 trillion than the marginal propensity of imports is 0.25.
There is a mutually beneficial relationship between the Real GDP and the consumption function and imports. The change in one of these values reflects itself in change of the others. As you move ahead the intricate balance between the different components of aggregate expenditure in relation to the Real GDP will become clearer.
Links of Previous Main Topic:-
- Definition of Economics
- Economic Problem
- Expenditure Multiplier Know the Keynesian Model
- Fixed Prices and Expenditure Plans
Links of Next Macroeconomics Topics:-
- Real GDP with A Fixed Price Level
- Actual Expenditure Planned Expenditure and Real GDP
- Convergence to Equilibrium
- Multiplier
- The Basic Idea of the Multiplier
- The Multiplier Effect
- Why Is the Multiplier Greater Than 1
- The Size of the Multiplier
- Imports and Income Taxes
- The Multiplier Process
- Business Cycle Turning Points
- The Multiplier and the Price Level
- Adjusting Quantities and Prices
- Aggregate Expenditure and Aggregate Demand
- Deriving the Aggregate Demand Curve
- Changes in Aggregate Expenditure and Aggregate Demand
- Equilibrium Real GDP and the Price Level
- Expenditure Multiplier Know the Keynesian Model
