Suppose the U.S. experiences a recession while foreign countries that trade with

ID: 1208379 • Letter: S

Question

Suppose the U.S. experiences a recession while foreign countries that trade with the U.S. prosper. How will this affect the U.S.?

U.S. imports and its aggregate demand will decrease.

U.S. net exports and its aggregate demand will decrease.

U.S. exports and its aggregate demand will decrease.

U.S. exports and its aggregate demand will increase.

Refer to the Figure above. A movement from F to B

will increase real GDP and represents economic growth.

will increase real GDP but does not represent economic growth.

implies that the country's productive ability has increased.

will not increase real GDP or potential output.

U.S. imports and its aggregate demand will decrease.

U.S. net exports and its aggregate demand will decrease.

U.S. exports and its aggregate demand will decrease.

U.S. exports and its aggregate demand will increase.

A is Correct, U.S. Imports will decrase due to low consumption and economic slowdown and hence aggregate demand will decrease.

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