If Canadian college students decide that drinking Mexican-brewed beer helps one get noticed, net exports will tend to fall, causing aggregate demand to ________ and the ________ curve to shift to the left, everything else held constant.
A) fall; MP
B) fall; IS
C) rise; MP
D) rise; IS

Question

Quizplus · Accepted Answer

If Canadian college students increase their consumption of Mexican-brewed beer, it implies an increase in imports from Mexico. This would lead to a decrease in net exports (exports minus imports) for Canada. A fall in net exports reduces aggregate demand in the Canadian economy. The IS curve, which represents the relationship between interest rates and levels of output that are consistent with equilibrium in the goods and services market, would shift to the left as a result of the decrease in aggregate demand.

If Canadian College Students Decide That Drinking Mexican-Brewed Beer Helps