The Foreign Purchases Effect on Aggregate Demand Suggests That a

question 18

Multiple Choice

The foreign purchases effect on aggregate demand suggests that a

• A) fall in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand.
• B) fall in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand.
• C) rise in our domestic price level will increase our imports and reduce our exports, thereby reducing the net exports component of aggregate demand.
• D) rise in our domestic price level will decrease our imports and increase our exports, thereby reducing the net exports component of aggregate demand.

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Definitions:

Bank Service Charges

Fees charged by banks for various account services.

Note Collected

An increase in cash or accounts receivable resulting from the collection of a promissory note.

Accounts Receivable

Represents the money owed to a company by its customers for goods or services that have been delivered but not yet paid for.