Suppose the U.S. is a major importer of Japanese automobiles. All other things unchanged, a
Decrease in subsidies granted by the Japanese governments to its auto manufacturers will
A) increase U.S. net exports and shift the aggregate demand curve to the right.
B) decrease U.S. net exports and shift the aggregate demand curve to the right.
C) increase U.S. net exports and shift the short-run aggregate supply curve to the left.
D) decrease U.S. net exports and shift the short-run aggregate supply curve to the left.

Question

Quizplus · Accepted Answer

A decrease in subsidies to Japanese auto manufacturers would likely increase the cost of Japanese automobiles, reducing U.S. imports of these cars. This would increase U.S. net exports, shifting the aggregate demand curve to the right.