Author Question: Ceteris paribus, how does an expansion in the United States affect U.S. net exports? What will be ... (Read 55 times)

burton19126 · **on:** Jun 29, 2018

Ceteris paribus, how does an expansion in the United States affect U.S. net exports?

What will be an ideal response?

Question 2

Interest rates in the economy have fallen. How will this affect aggregate demand and equilibrium in the short run?

A) Aggregate demand will fall, the equilibrium price level will rise, and the equilibrium level of GDP will fall.
B) Aggregate demand will fall, the equilibrium price level will fall, and the equilibrium level of GDP will fall.
C) Aggregate demand will rise, the equilibrium price level will fall, and the equilibrium level of GDP will rise.
D) Aggregate demand will rise, the equilibrium price level will rise, and the equilibrium level of GDP will rise.

Gabe · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

As GDP increases in the United States due to the expansion, the incomes of households rise. Households respond by increasing their purchases of goods and services. Some of the increase in purchases includes domestic goods and services; some of the increase includes foreign produced goods and services. This essentially raises imports. Assuming that exports do not change, net exports will fall.

Answer to Question 2

D