Suppose the U.S. government decides to increase its imports from Turkey. All other things unchanged,
A) U.S. aggregate demand increases and Turkey's aggregate demand decreases.
B) U.S. aggregate demand decreases and Turkey's aggregate demand increases.
C) U.S. aggregate demand and Turkey's aggregate demand increase.
D) U.S. aggregate demand is not affected but Turkey's aggregate demand increases.

Question

Quizplus · Accepted Answer

If the U.S. government increases its imports from Turkey, it means that U.S. consumers and businesses are buying more products from Turkey. This will lead to a decrease in U.S. aggregate demand as spending shifts towards imports. At the same time, Turkey's aggregate demand will increase as its exports to the U.S. increase. Therefore, choice (B) is the best answer.