Europe and Asia both fall into deep economic recessions. What impact will this have on U.S. aggregate demand?
A) None. A nation's aggregate demand is only affected by its own economic conditions.
B) U.S. aggregate demand will remain unchanged.
C) U.S. aggregate demand will decrease.
D) The U.S. aggregate demand curve will shift to the right.

Question

Quizplus · Accepted Answer

If both Europe and Asia fall into deep economic recessions, their demand for U.S. goods and services will decrease, leading to a decrease in U.S. exports. This decline in exports will lead to a decrease in U.S. aggregate demand, thereby shifting the aggregate demand curve to the left.

Europe and Asia Both Fall into Deep Economic Recessions