If all the economies of the European Union experience a recession, the United States experiences ________ and the IS curve ________.
A) no change; stays constant
B) a positive aggregate demand shock; shifts right
C) a negative aggregate demand shock; shifts left
D) no change; shifts right
E) Not enough information is given.

Question

Quizplus · Accepted Answer

If all the economies of the European Union experience a recession, it would lead to a decrease in the demand for US goods and services, as the EU is a major trading partner of the US. This would result in a negative aggregate demand shock, shifting the IS curve to the left.

If All the Economies of the European Union Experience a Recession