Adding globalization and large trade deficits to the standard AS/AD model creates:
A)reduced domestic production and consumption.
B)increased domestic production and consumption.
C)increased domestic production and reduced consumption.
D)decreased domestic production and increased consumption.

Question

Quizplus · Accepted Answer

Adding globalization and large trade deficits to the standard Aggregate Supply/Aggregate Demand (AS/AD) model typically results in decreased domestic production, as domestic firms face tougher competition from abroad. At the same time, it leads to increased consumption because consumers have access to a wider range of imported goods, often at lower prices than domestic alternatives.

Adding Globalization and Large Trade Deficits to the Standard AS/AD