Suppose the rest of the world experiences a recession that causes a decrease in foreign income. From the domestic economy's perspective, this foreign income decrease will cause which of the following as the domestic economy adjusts to the fall in foreign income?

Question

Quizplus · Accepted Answer

A decrease in foreign income typically leads to a decrease in demand for exports from the domestic economy, resulting in a decrease in domestic income. This can also lead to a decrease in imports as domestic income falls.

Suppose the Rest of the World Experiences a Recession That