ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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shift the aggregate demand curve leftward.
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shift the aggregate supply curve leftward.
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decrease Canada’s exports and increase Canada’s imports.
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increase Canada’s exports and decrease Canada’s imports.
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Detailed explanation-1: -A lower price level makes that economy’s goods more attractive to foreign buyers, increasing exports. It will also make foreign-produced goods and services less attractive to the economy’s buyers, reducing imports. The result is an increase in net exports.
Detailed explanation-2: -Net exports are one component of aggregate demand; a change in net exports shifts the aggregate demand curve and affects real GDP in the short run. All other things unchanged, a reduction in net exports reduces aggregate demand, and an increase in net exports increases it.
Detailed explanation-3: -foreign trade effects. The substitution effect suggests that a decrease in the Canadian price level relative to other countries will: Shifts the aggregate demand curve rightward.
Detailed explanation-4: -Which of the following would happen to Canadian net exports and aggregate demand if countries that imported from Canada went into recession? Net exports would fall, and aggregate demand would shift left.