Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Shift the demand curve to the right for the trading partner
B
Shift the supply curve to the left for the trading partner
C
Shift both curves to the right for the trading partner
D
No changes should be made to the trading partner's graph
Understanding the Answer
Let's break down why this is correct
Answer
When a country's income levels increase significantly, it means that people in that country have more money to spend. This additional income usually leads to an increase in demand for goods and services, including those from trading partners. On an aggregate demand and supply graph, this can be shown by shifting the aggregate demand curve to the right, indicating that more goods are being demanded at every price level. For example, if Country A's income rises, it might buy more cars from Country B, leading to higher demand for cars. As a result, Country B may see an increase in production and possibly higher prices due to the increased demand.
Detailed Explanation
When a country's income goes up, its people can buy more goods. Other options are incorrect because This option suggests that the supply curve should change; This option says both curves should shift.
Key Concepts
Aggregate Demand and Supply
Economic Interdependence
Graphical Analysis
Topic
Graphing Economic Impacts
Difficulty
medium level question
Cognitive Level
understand
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