When determining the AE function for an open economy with government,it is generally assumed that as real national income
A)increases,exports will decrease.
B)increases,net exports will decrease.
C)increases,imports will decrease.
D)decreases,net exports will decrease.
E)decreases,exports will decrease.

Question

Quizplus · Accepted Answer

In an open economy, as real national income increases, net exports will decrease. This is because as income increases, there will be more demand for imports, which will reduce the amount of goods available for export. Additionally, as income increases, the currency may appreciate, making exports more expensive and less competitive in the global market.

When Determining the AE Function for an Open Economy with Government,it