Which of the following statements is correct?
(a) an increase in exports and an increase in ports will both tend to increase the equilibrium gdp.
(b) an increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium gdp.
(c) an increase in exports and an increase in imports will both tend to decrease the equilibrium gdp.
(d) an increase in exports will tend to decrease, and an increase in imports will tend to increase, the equilibrium gdp.

The correct answer is (B) An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP.

Explanation:

The equilibrium GDP is produced when companies within a nation produce exactly the amount of goods and services that people want to buy. In economic terms, equilibrium GDP can be defined as the level of GDP, where aggregate demand and aggregate supply are equal. Aggregate demand represents the total amount of goods and services that people want and can buy. In the United States, for example, aggregate demand is equal to all products and services produced in the United States that are acquired by people nationally or internationally. Graphically, aggregate demand is lower at high price points and is shown as a downward curve, where demand is higher at low prices. Aggregate offer is the total value of goods and services produced in a country in a single year. If all resources within the country are put to work at their maximum level of efficiency, aggregate supply and GDP will always be the same. These resources include everything from teamwork and natural resources. Since this type of efficiency is rare, aggregate supply tends to increase as price levels rise. This can be shown graphically as a related line, where price and GDP increase proportionally to one another. Graphically, GDP balance can be found by locating the point where the demand and aggregate supply curves intersect. Since these values change over time, changing curves, GDP balance is always changing. For example, the aggregate offer may increase over time, although all resources are already used with maximum efficiency. This occurs when technological advances allow companies to generate more output of the same amount of input. In real scenarios, most economies can increase aggregate supply and equilibrium GDP simply by improving overall efficiency. Changes in aggregate demand can also impact equilibrium GDP. By increasing price levels, people can afford less products and services, leading to a decrease in aggregate demand. This results in a decrease in equilibrium GDP. The reverse is also true that lower prices lead to an increase in aggregate demand, as well as an increase in equilibrium GDP.

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