If young business professionals in Canada suddenly decide that driving German-made cars is an important status symbol, net exports will tend to ________ causing aggregate demand to ________, everything else held constant.

Question

Quizplus · Accepted Answer

If young business professionals in Canada increase their demand for German-made cars, Canada's imports from Germany will increase. This leads to a decrease in net exports (exports minus imports) because more is being imported. Since net exports are a component of aggregate demand (AD = C + I + G + (X-M)), a decrease in net exports will lead to a decrease in aggregate demand, everything else held constant.

If Young Business Professionals in Canada Suddenly Decide That Driving