If exports rose and imports fell,
A)AD would decrease.
B)AD would increase.
C)AD would be unaffected.
D)AD could either increase or decrease.

Question

If exports rose and imports fell,
A)​AD would decrease.
B)​AD would increase.
C)​AD would be unaffected.
D)​AD could either increase or decrease.

Quizplus · Accepted Answer

An increase in exports and a decrease in imports will result in a net inflow of money into the economy, increasing the supply of foreign currency. This will cause the value of the domestic currency to appreciate, making exports more expensive and imports cheaper, which in turn will boost the demand for domestic goods and services. As a result, aggregate demand (AD) would increase.

If Exports Rose and Imports Fell