Suppose a recession in Europe reduces U.S. net exports at every price level. Which of the following would you expect to occur in the U.S. as a result of this change?

Question

Quizplus · Accepted Answer

A recession in Europe leading to reduced U.S. net exports would likely decrease aggregate demand in the U.S. economy. This decrease in demand would, in the short run, lead to higher unemployment as firms reduce production and potentially lay off workers. With lower demand, there's also less pressure on prices, leading to lower inflation rates.

Suppose a Recession in Europe Reduces U