What is the foreign trade effect, and how does it explain the shape of the aggregate demand curve?
What will be an ideal response?
The foreign trade effect helps explain the inverse relationship between the price level and the quantity demanded of real output. As the U.S. price level falls, U.S. goods become cheaper for foreigners to buy. As foreigners buy more U.S. goods, exports increase, which contributes to an increase in GDP or real output. In addition, as the U.S. price level falls, domestic goods become cheaper for U.S. consumers relative to imports. As U.S. consumers buy more domestic goods, this also contributes to an increase in GDP or real output. This inverse relationship contributes to the downward slope of the aggregate demand curve.
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What is an example of the bidder's curse?
A) addiction to auctions B) paying less than the auctioned good value C) Bid a value that is higher than the price of the good at a retail store. D) Never win an auction.
An effective craft union acts as a monopoly
a. demander of labor. b. seller of labor. c. demander of capital. d. seller of capital.
A government agricultural policy that restricts output by limiting the number of farm acres that can be used to produce a particular crop is the
A) marketing quota system. B) acreage allotment program. C) price support program. D) target price system. E) paying farmers not to produce system.
Which of the following would best explain a decline in potential GDP?
A) Negative net investment B) The discovery of vast new oil reserves C) a lower price level D) a decrease in the infant mortality rate E) decrease in wages and profits