📚 Learning Guide
Aggregate Demand and Unemployment
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Arrange the following steps in the correct sequence to illustrate how increased net exports influence aggregate demand and reduce cyclical unemployment: A) Increased net exports lead to higher aggregate demand, B) Higher aggregate demand stimulates production, C) Increased production requires more labor, D) More labor reduces cyclical unemployment.

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Learning Path
Learning Path

Question & Answer
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Choose the Best Answer

A

A→B→C→D

B

B→A→D→C

C

C→D→A→B

D

D→C→B→A

Understanding the Answer

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Answer

Increased net exports occur when a country sells more goods and services to other countries than it buys from them. This situation leads to higher aggregate demand, which means that the overall demand for goods and services in the economy increases. As a result of this higher demand, businesses begin to produce more to meet the needs of consumers. To produce more, companies need to hire additional workers, which means they require more labor. When more people are employed, it helps to reduce cyclical unemployment, as more individuals find jobs due to the increased economic activity.

Detailed Explanation

When net exports go up, it means we sell more goods to other countries. Other options are incorrect because This option suggests that higher demand comes after production; This option starts with hiring more workers, but that happens after demand increases.

Key Concepts

Aggregate Demand
Cyclical Unemployment
Net Exports
Topic

Aggregate Demand and Unemployment

Difficulty

medium level question

Cognitive Level

understand

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