An unexpected increase in export growth is a:
A) shock that is always matched by an equal decrease in import growth.
B) positive AD shock.
C) negative AD shock.
D) factor that has no impact on AD in the short run.

Question

Quizplus · Accepted Answer

An unexpected increase in export growth is a positive shock to the economy, also known as positive AD (aggregate demand) shock. It can increase the demand for exports, leading to an increase in the production of goods and services, which can create jobs and income in the short run. However, it can also lead to inflation and trade imbalances in the long run. Option A is incorrect as an increase in export growth may not be matched by an equal decrease in import growth, as they are not always directly related. Option C is incorrect as negative AD shock would decrease overall demand in the economy. Option D is incorrect as an increase in export growth can have an impact on AD in the short run.

An Unexpected Increase in Export Growth Is A