Figure 36-7

-In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?
A)a European economic expansion
B)A decrease in the money supply
C)An increase in the interest rate
D)An increase in the U.S.price level

Question

Figure 36-7
​ 
-In Figure 36-7, there are three aggregate expenditure functions (C + I + G + X − IM) for an open economy.Which of the following would cause a movement from A to B?
A)a European economic expansion 
B)A decrease in the money supply 
C)An increase in the interest rate 
D)An increase in the U.S.price level

Quizplus · Accepted Answer

A European economic expansion would increase exports (X) from the depicted economy (assuming it's the U.S.), shifting the aggregate expenditure function upwards from A to B. This is because an economic expansion in Europe would likely increase their demand for imports, including goods and services from the U.S.

Figure 36-7 ​

Figure 36-7