A Reduction in Net Exports, All Other Things Unchanged

question 60

Multiple Choice

A reduction in net exports, all other things unchanged

• A) results in a movement up along the aggregate demand curve.
• B) reduces aggregate supply.
• C) reduces aggregate demand.
• D) does not change aggregate demand or aggregate supply in the domestic economy.

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Definitions:

Income Effect

Shifts in income for individuals or within the economy and their consequences on the volume of goods or services demanded.

Utility Function

A mathematical representation of a consumer's preference, showing the level of satisfaction or happiness derived from consuming various bundles of goods and services.

Income Effect

The impact of income changes on an individual or economic level on the demand for various products or services.

Substitution Effect

The adjustment in how consumers spend due to differences in the prices between goods, leading to the substitution of one product for another.