An increase in which of the following variables will cause an increase in domestic demand?

Question

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An increase in domestic income will lead to an increase in domestic demand, as consumers will have more purchasing power and be able to buy more goods and services. Increases in net exports (A), foreign income (C), and the real exchange rate (D) may influence domestic demand indirectly, but they do not have a direct impact. The nominal exchange rate (E) also does not directly impact domestic demand.

An Increase in Which of the Following Variables Will Cause