Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increase in aggregate demand due to higher imports from the recovering country
B
Decrease in aggregate demand as domestic consumers save more
C
No change in aggregate demand as external factors do not influence domestic economics
D
Increase in aggregate demand due to lower interest rates in trading partner countries
Understanding the Answer
Let's break down why this is correct
Answer
When a country's economy recovers and its income levels increase, people in that country usually have more money to spend. This means they are likely to buy more goods and services, not just from their own country but also from other countries. As a result, the aggregate demand from its trading partners will likely increase because these trading partners will be exporting more to the recovering country. For example, if a country like Japan experiences economic growth and its citizens start buying more cars, this will boost car exports from countries like Germany and the United States. Overall, the increase in income levels can lead to a rise in demand for imports, benefiting the economies of trading partners.
Detailed Explanation
When a country's economy gets better, people have more money to spend. Other options are incorrect because Some might think that people save more money when they earn more; It's a common belief that one country's economy doesn't affect others.
Key Concepts
Aggregate Demand
Economic Interdependence
Income Levels
Topic
Graphing Economic Impacts
Difficulty
medium level question
Cognitive Level
understand
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