All else equal, an increase in imports will shift the aggregate expenditures curve:
A)upward and the aggregate demand curve rightward.
B)upward and the aggregate demand curve leftward.
C)downward and the aggregate demand curve rightward.
D)downward and the aggregate demand curve leftward.

Question

Quizplus · Accepted Answer

An increase in imports will lead to a decrease in net exports (exports - imports) which will result in a decrease in aggregate expenditures. Therefore, the aggregate expenditure curve will shift downward. As aggregate demand is the sum of all expenditures in the economy, a decrease in aggregate expenditures will also shift the aggregate demand curve leftward.

All Else Equal, an Increase in Imports Will Shift the Aggregate