The foreign trade effect:
A)shifts the aggregate demand curve rightward.
B)shifts the aggregate demand curve leftward.
C)shifts the aggregate supply curve rightward.
D)none of these.

Question

Quizplus · Accepted Answer

The foreign trade effect refers to how changes in the price level affect net exports, which in turn can influence the aggregate demand curve. However, it does not directly cause a shift in the aggregate demand or supply curves; rather, it affects the movement along the aggregate demand curve.

The Foreign Trade Effect