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US Net Exports Fall Due to Recessions in Foreign Countries

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Essay

U.S. net exports fall due to recessions in foreign countries.
A. According to the aggregate demand and supply model, what happens to the price level and output in the short run?
B. According to the short-run Phillips curve what happens to inflation and unemployment in the short run?
C. If the Fed wanted to reverse the effects of this shock on output, what should it do?


Definitions:

Retained Earnings

The amount of net earnings left in the company after dividends are paid out to shareholders, used for investment or to pay off debt.

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