Other things being equal, how will a decrease in an economy's exports affect aggregate expenditures and output?
A) Domestic aggregate expenditures will increase, and the equilibrium level of output will increase.
B) Domestic aggregate expenditures will decrease, and the equilibrium level of output will increase.
C) Domestic aggregate expenditures will remain the same, and the equilibrium level of output will remain the same.
D) Aggregate expenditures will be negative, and equilibrium level of output will decline.

Question

Other things being equal, how will a decrease in an economy's exports affect aggregate expenditures and output?  
A) Domestic aggregate expenditures will increase, and the equilibrium level of output will increase. 
B) Domestic aggregate expenditures will decrease, and the equilibrium level of output will increase. 
C) Domestic aggregate expenditures will remain the same, and the equilibrium level of output will remain the same. 
D) Aggregate expenditures will be negative, and equilibrium level of output will decline.

Quizplus · Accepted Answer

A decrease in exports implies a decrease in net exports (exports - imports). As a result, aggregate expenditures will decrease since exports are a component of aggregate expenditures. This decrease in aggregate expenditures will lead to a decrease in equilibrium level of output. Therefore, choice B is the best answer.

Other Things Being Equal, How Will a Decrease in an Economy's