Consider the Following News Headline: "Canadian Exporters Hurt by Foreign

question 34

Multiple Choice

Consider the following news headline: "Canadian exporters hurt by foreign recession." Assuming that aggregate output is demand-determined,what effect will this have,all other things equal,on the AE function and on equilibrium national income?

• A)The AE function will shift down parallel to itself,and equilibrium national income will fall.
• B)The AE function will rotate upward (become steeper),and equilibrium national income will rise.
• C)The AE function will rotate downward (become flatter),and national income will fall.
• D)The AE function will shift up parallel to itself,and equilibrium national income will rise.
• E)There will be no change in the AE function or in equilibrium national income.

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Definitions:

Functional Finance

An economic theory that prioritizes achieving full employment and stable pricing over balancing budgets.

Potential GDP

The maximum possible level of output an economy can produce without triggering inflation, assuming full employment and optimal use of resources.

Fiscal Policy

Government policies on taxation and spending that are used to influence the economy.

Federal Spending

The expenditure of funds by a government to support its programs and policies.