Question

Assume a nation’s economy is operating in equilibrium. If exports increase and imports decrease, how will...

Assume a nation’s economy is operating in equilibrium. If exports increase and imports decrease, how will output, employment, and price level likely change?

Output / Employment / Price Level

Increase / Increase / Increase

Increase / Increase / Decrease

Increase / Decrease / Increase

Decrease / Decrease / Increase

Decrease / Decrease / Decrease

Homework Answers

Answer #1

Net exports = Exports - imports

When exports increases and imports decreases, Exports - Imports will increases and thus Net exports will increases. Increase in net exports result in equilibrium output in the goods market for any given interest rate and thus will shift IS curve to the right and this rightward shift of IS curve will result in Rightward shift of AD(Aggregate demand) curve while AS(Aggregate supply) curve will remain same.

This rightward shift of AD curve will result in increase in Output and increase in price level. As output increases, this means that more people are employed in orde rto produce this higher output and thus employment will also increase.

Thus, Output will increase, Employment will increse and Price level will also increase.

Hence, the correct answer is (a) Increase / Increase / Increase.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In which case will net exports increase? an increase in investment more than one of the...
In which case will net exports increase? an increase in investment more than one of the above an increase in government spending an increase in taxes a real appreciation The natural level of employment will increase when which of the following occurs? a decrease in unemployment benefits an increase in the actual unemployment rate an increase in employment insurance an increase in the markup of prices over costs a decrease in the natural level of output Which of the following...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, government increases...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, government increases spending to fight the virus, would this, ceteris paribus, be reflected as a change in aggregate demand or a change in aggregate supply? Explain. Be sure to clearly identify a textbook factor of AD or AS that is causing this change. Would this change be an increase or decrease? Explain.  Would this change result in the economy moving to a short-run below, or above, full-employment...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, shortages in...
Assume the economy is at a full-employment equilibrium. Now, if due to the pandemic, shortages in the supply chain results in higher resource prices, would this, ceteris paribus, be reflected as a change in aggregate demand or a change in aggregate supply? Explain. Be sure to clearly identify a textbook factor of AD or AS that is causing this change. Would this change be an increase or decrease? Explain. Would this change result in the economy moving to a short-run...
2) Assume that (a) the price level is flexible upward but not downward and (b) the...
2) Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently operating at its full-employment output. Other things equal, how will each of the following affect the equilibrium price level and equilibrium level of real output in the short run? a. An increase in aggregate demand . b. A decrease in aggregate supply, with no change in aggregate demand. c. Equal increases in aggregate demand and aggregate supply. d. A decrease in...
Assume that the economy of Fruitland is a long-run equilibrium with full employment. In the short...
Assume that the economy of Fruitland is a long-run equilibrium with full employment. In the short run, nominal wages are fixed. (a) Assume that there is an increase in exports from Fruitland. Explain the effect of higher exports on the following in the short run:             (i) Real GDP (ii) Price Level (b) Based on your answer in part (a), what is the impact of higher exports on real wages in the short run? Explain.       (c) As a result of...
Ceteris paribus, a decrease in the U.S. price level will cause an increase in U.S. exports....
Ceteris paribus, a decrease in the U.S. price level will cause an increase in U.S. exports. an increase in U.S. imports. the aggregate demand curve to shift to the left.
Which of the following statements is correct? Group of answer choices a, An increase in exports...
Which of the following statements is correct? Group of answer choices a, An increase in exports will tend to increase, and an increase in imports will tend to decrease, the equilibrium GDP. b. An increase in exports and an increase in imports will both tend to increase the equilibrium GDP. c. An increase in exports and an increase in imports will both tend to decrease the equilibrium GDP. d. An increase in exports will tend to decrease, and an increase...
Assume the economy is initially in equilibrium, and then firms expect future total factor productivity, z’,...
Assume the economy is initially in equilibrium, and then firms expect future total factor productivity, z’, to decrease. Using the New Keynesian Model framework, what are the implications on the following: a) Output supply (increase / decrease / indeterminate / no change)? b) Output demand (increase / decrease / indeterminate / no change)? c) Labor supply (increase / decrease / indeterminate / no change)? d) Labor demand (increase / decrease / indeterminate / no change)? e) Money supply (increase /...
An appreciation of the U.S. dollar will likely cause U.S. exports to ________ and U.S. imports...
An appreciation of the U.S. dollar will likely cause U.S. exports to ________ and U.S. imports to ________. decrease; decrease increase; decrease increase; increase decrease; increase
If exports increase and imports decrease in the U.S., what happens to the trade deficit? Will...
If exports increase and imports decrease in the U.S., what happens to the trade deficit? Will this help or hurt the U.S.? In what ways is a bigger trade deficit a problem for the country? What good is the deficit? Hint: Use the currency market supply and demand to determine the exchange rate.