Consider the following news headline: "Canadian exporters hurt by foreign recession." Assuming that aggregate output is demand- determined, what effect will this have, all other things equal, on the AE function and on equilibrium national income?
A)the AE function will rotate upward (become steeper)and equilibrium national income will rise.
B)the AE function will shift up parallel to itself and equilibrium national income will rise.
C)the AE function will rotate downward (become flatter)and national income will fall.
D)there will be no change in the AE function or in equilibrium national income.
E)the AE function will shift down parallel to itself and equilibrium national income will fall.

Question

Quizplus · Accepted Answer

A foreign recession would decrease demand for Canadian exports, shifting the AE function down and reducing equilibrium national income.

Consider the Following News Headline: "Canadian Exporters Hurt by Foreign