Suppose there is an increase in foreign output. This increase in foreign output will cause which of the following in the domestic country?

Question

Quizplus · Accepted Answer

An increase in foreign output leads to higher demand for domestic goods, as foreign consumers now have more income to spend. This results in an increase in domestic consumption (as domestic producers earn more and can spend more), an increase in domestic output (to meet the higher foreign demand), and an increase in net exports (as more domestic goods are sold abroad).

Suppose There Is an Increase in Foreign Output