A decrease in foreign real GDP will

Question

Quizplus · Accepted Answer

A decrease in foreign real GDP would lead to a decrease in domestic exports, as foreign consumers and businesses would have less income to spend on goods and services, including those imported from the domestic economy. This decrease in exports would reduce the aggregate demand in the domestic economy, leading to a leftward shift of the IS curve, which represents the relationship between the interest rate and the level of income that brings the goods market into equilibrium.

A Decrease in Foreign Real GDP Will