1.30 The Biggest Risk to Growth The biggest risk to growth in the UK is that the economies of its trading partners suffer badly, slowing demand for UK exports.

Source: Financial Times, 11 November 2010 a Does the decrease in UK exports bring a movement along the AE curve or a shift of the AE curve?

b Suppose that UK exports decrease by £120 billion in 2011 and the multiplier is 1.5. If other things remain the same, what is the decrease in real GDP?

c Suppose that the UK economy is at full employment in 2011 and exports increase by £120 billion. Will there still be a multiplier effect?