-Suppose the economy is at point B. If a recession in another country decreases exports, to what point might economy move in the short run?
A) It stays at point B.
B) It shifts to a point such as A.
C) It shifts to a point such as C.
D) None of the above answers are correct because it is the SAS curve that shifts, not the AD curve.

Question

-Suppose the economy is at point B. If a recession in another country decreases exports, to what point might economy move in the short run?
A) It stays at point B. 
B) It shifts to a point such as A. 
C) It shifts to a point such as C. 
D) None of the above answers are correct because it is the SAS curve that shifts, not the AD curve.

Quizplus · Accepted Answer

A recession in another country decreases exports, which reduces aggregate demand. This shifts the AD curve to the left, leading to a decrease in output and a movement to a point such as A.

-Suppose the Economy Is at Point B