ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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There will be no change in aggregate demand because United States aggregate demand depends only on the income of United States consumers.
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Aggregate demand will decrease because the demand for United States exports decreases.
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Aggregate demand will decrease because the value of the United States dollar decreases relative to the Japanese yen.
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Aggregate demand will increase because a decrease in income in Japan causes an increase in income in the United States.
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Aggregate demand will increase because interest rates in the United States decrease.
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Detailed explanation-1: -Which of the following statements best describes the impact of a decrease in Japanese income on aggregate demand in the United States? Aggregate demand will decrease because the demand for United States Exports decreases.
Detailed explanation-2: -Aggregate demand will increase because a decrease in income in Japan causes an increase in income in the United States.
Detailed explanation-3: -The reduction in aggregate demand or supply will cause unemployment to increase as the change in price level lead to a change in output. The price level decreases when aggregate demand decreases and increases when aggregate supply decreases.
Detailed explanation-4: -An increase in the money supply, and increase in government purchases, and a cut in personal taxes all cause the aggregate demand curve to shift to the right.
Detailed explanation-5: -The correct answer to the given question is option c. An increase in income taxes. An increase in income taxes leads to decrease in disposable income for consumers thereby dampening the aggregate demand for goods and services.