If exports were to rise and imports to fall,leading to an increase in quantity demanded of aggregate output,we would expect as a result,
A)An increase in the price level
B)A fall in the price level.
C)the open economy effect to lessen.
D)No change in the price level.

Question

Quizplus · Accepted Answer

If exports rise and imports fall, it would lead to an increase in net exports. This would cause an increase in aggregate demand, which would lead to an increase in the overall quantity demanded of aggregate output. Since there is an increase in demand without a corresponding increase in supply, there would be upward pressure on prices, resulting in a fall in the price level.

If Exports Were to Rise and Imports to Fall,leading to an Increase