An increase in exports will have what effect on aggregate demand?
A)It will decrease.
B)It will increase.
C)It may increase or decrease depending on the marginal propensity to import.
D)It will have no effect on aggregate demand.

Question

Quizplus · Accepted Answer

When exports increase, there is an inflow of foreign currency into the economy, which increases the country's income and wealth. This increase in income and wealth leads to an increase in consumption, investment, and government spending, ultimately leading to an increase in aggregate demand. This is known as the export-led growth model.

An Increase in Exports Will Have What Effect on Aggregate