Starting from disequilibrium in both markets,an increase in absorption will cause:
A) the supply curve to shift to the left for both tradables (T) and nontradables (N).
B) the demand curve to shift to the right for both T and N.
C) the demand curve to shift to the right for N and to the left for T.
D) no shifts in the curves, but the economy moves to a position of inflation and external deficit.

Question

Quizplus · Accepted Answer

An increase in absorption means that there is an increase in the total demand for goods and services in the economy. This leads to a rightward shift in the demand curve for both tradables (T) and nontradables (N), as consumers are willing to purchase more of both types of goods.

Starting from Disequilibrium in Both Markets,an Increase in Absorption Will