📚 Learning Guide
Aggregate Demand and Unemployment
medium

If an increase in consumer spending (A) leads to a rise in aggregate demand (B), then an increase in net exports (C) should lead to what outcome in the economy (?)

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Learning Path

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Choose the Best Answer

A

Increase in aggregate demand

B

Decrease in unemployment

C

Decrease in consumer confidence

D

Increase in inflation

Understanding the Answer

Let's break down why this is correct

Answer

When consumer spending increases, it means people are buying more goods and services, which boosts overall demand in the economy. This rise in aggregate demand can lead to more businesses producing more products, creating jobs and reducing unemployment. Similarly, when net exports increase, it means a country is selling more goods and services to other countries than it is buying from them. This also raises aggregate demand because more money flows into the economy from foreign buyers. For example, if a country starts exporting more cars, the car manufacturers will need to hire more workers, which helps lower unemployment and stimulates further economic growth.

Detailed Explanation

When net exports go up, it means more goods are sold to other countries. Other options are incorrect because Some might think that more demand directly means fewer jobless people; People might believe that higher exports would make consumers feel less confident.

Key Concepts

Aggregate Demand
Net Exports
Unemployment
Topic

Aggregate Demand and Unemployment

Difficulty

medium level question

Cognitive Level

understand

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