If exports rose and imports fell,
A)AD would fall.
B)AD would rise.
C)AD would be unaffected.
D)AD could either increase or decrease.

Question

Quizplus · Accepted Answer

An increase in exports and a decrease in imports would mean that there is an increase in net exports (exports - imports). The increase in net exports will shift the aggregate demand (AD) curve to the right (increase in AD) as it increases the demand for goods and services in the economy. This is because an increase in net exports leads to an increase in the demand for domestic output, thereby raising the total expenditure in the economy, which in turn increases the quantity of goods and services demanded at every price level.

If Exports Rose and Imports Fell