Consider the Following News Headline: "China Signs Deal to Buy

question 13

Multiple Choice

Consider the following news headline: "China signs deal to buy more Canadian wheat." 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)there will be no change in the AE function or in equilibrium national income.
• B)the AE function will shift up parallel to itself and equilibrium national income will rise.
• C)the AE function will shift down parallel to itself and equilibrium national income will fall.
• D)the AE function will rotate upward (become steeper)and equilibrium national income will rise.
• E)the AE function will rotate downward (become flatter)and national income will fall.

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Definitions:

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