Foreign real national income rises.This raises U.S.___________ which ________ aggregate demand (AD).The AD curve shifts ___________ as a result.
A) net exports; raises; rightward
B) imports; raises; rightward
C) prices; reduces; leftward
D) investment; reduces; leftward
E) none of the above

Question

Quizplus · Accepted Answer

When foreign real national income rises, their demand for US goods and services increases, leading to an increase in net exports. This increase in net exports raises U.S. net exports, which feeds into the aggregate demand (AD) equation as a positive term. This increase in the AD curve shifts it rightward. Therefore, the correct answer is A, net exports; raises; rightward.

Foreign Real National Income Rises