Question

Other things equal, if the national incomes of the major trading partners of the United States were to rise, the U.S.-

A. aggregate demand curve would shift to the right.
B. aggregate supply curve would shift to the left.
C. aggregate supply curve would shift to the right.
D. aggregate demand curve would shift to the left.

Answer 1

The correct answer is A. The U.S. aggregate demand curve would shift to the right because increased national incomes of trading partners lead to higher demand for U.S. exports, which are a component of aggregate demand.

Step-by-step explanation:

When the national incomes of the major trading partners of the United States increase, their demand for U.S. goods and services is likely to rise. This increase in demand from foreign consumers is represented by an increase in net exports (X-M), which is a component of the aggregate demand (AD). Therefore, the AD curve for the United States would shift to the right. This is because an increase in net exports contributes to higher demand for domestically produced goods, thus increasing the overall aggregate demand.

According to the question, the correct answer would therefore be A. The U.S. aggregate demand curve would shift to the right.