Mauritius, an island off the coast of Africa, competes with other countries producing goods with low-skilled labor. In 2006, it was reported that its "... factories have been exposed to ... competition from China, India and other Asian mass producers." As a result, "the main export industry has seen a 30 per cent reduction in volume..." www.ft.com, 3/13/2006
The decrease in exports represents a change in ________ expenditure and will cause ________.

Question

Quizplus · Accepted Answer

The decrease in exports is considered an autonomous expenditure because it is not directly related to the income level of Mauritius but rather to external competitive pressures. This leads to a downward shift in the Aggregate Expenditure (AE) curve as overall spending decreases, and a leftward shift in the Aggregate Demand (AD) curve, reflecting a decrease in demand for Mauritius's goods.

Mauritius, an Island Off the Coast of Africa, Competes with Other