If exports and imports both fell, but exports fell more than imports,
A)AD would fall.
B)AD would rise.
C)AD would be unaffected.
D)AD could either increase or decrease.

Question

Quizplus · Accepted Answer

A decrease in exports leads to a decrease in aggregate demand as it directly affects the country's GDP by reducing the export earnings. Even though imports also fell, the net effect is still a reduction in aggregate demand as the decrease in exports was greater than the decrease in imports.

If Exports and Imports Both Fell, but Exports Fell More