📚 Learning Guide
Aggregate Demand and Unemployment
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If a country experiences a significant increase in net exports, what is the most likely underlying effect on its unemployment rate?

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Choose the Best Answer

A

Unemployment decreases due to increased demand for domestic goods

B

Unemployment increases because more jobs are outsourced

C

Unemployment remains unchanged as exports do not affect local jobs

D

Unemployment increases due to a rise in import competition

Understanding the Answer

Let's break down why this is correct

Answer

When a country sees a big rise in net exports, it means that it is selling more goods and services to other countries than it is buying from them. This increase in demand for its products usually leads to more production in factories, which often requires hiring more workers. As more people get jobs, the unemployment rate tends to decrease because there are more opportunities for individuals to find work. For example, if a country that produces cars starts exporting them in large quantities, car manufacturers may need to hire additional workers to meet the growing demand. Overall, higher net exports can help boost the economy and lower unemployment.

Detailed Explanation

When a country sells more goods to other countries, it creates more jobs at home. Other options are incorrect because Some might think that selling more abroad means jobs are lost at home; It's a common mistake to think exports don't affect local jobs.

Key Concepts

Aggregate Demand
Unemployment
Net Exports
Topic

Aggregate Demand and Unemployment

Difficulty

medium level question

Cognitive Level

understand

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