Figure 20-8

-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?
A)1
B)2
C)3

Question

Figure 20-8
 
-Which of the graphs in Figure 20-8 illustrates the AD-AS shifts induced by the foreign sector following an increase in the U.S.federal deficit?
A)1 
B)2 
C)3

Quizplus · Accepted Answer

An increase in the U.S. federal deficit can lead to higher interest rates, attracting foreign capital and causing the U.S. dollar to appreciate. This can reduce net exports, shifting the aggregate demand (AD) curve to the left, as shown in graph 1.

Figure 20-8 -Which of the Graphs in Figure 20-8 Illustrates the AD-AS