If foreign income falls, there will be _____.
A) an increase in foreign spending
B) a rise in domestic aggregate demand
C) no change in either domestic net exports or aggregate demand
D) a decline in the domestic price level
E) a decrease in domestic aggregate demand

Question

Quizplus · Accepted Answer

If foreign income falls, it means there is a decrease in the demand for domestic goods and services, which leads to a decrease in exports. This leads to a decrease in net exports, which is a component of aggregate demand. Therefore, there will be a decrease in domestic aggregate demand.

If Foreign Income Falls, There Will Be _____