Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Aggregate demand in the trading partner's economy would likely increase due to higher imports.
B
Aggregate demand would decrease as the trading partner would focus on local production.
C
There would be no effect on aggregate demand since income levels are independent.
D
Aggregate demand might increase but only if the trading partner's economy is also growing.
Understanding the Answer
Let's break down why this is correct
Answer
When a country's income levels rise significantly, people in that country generally have more money to spend. This increased income allows them to buy more goods and services, including those from other countries. As a result, the trading partner's economy may experience an increase in aggregate demand, as they sell more products to the wealthier country. For example, if Country A's income rises, its citizens might buy more electronics from Country B, leading to higher sales and production in Country B. This can create a positive cycle, where increased demand leads to more jobs and further economic growth in Country B.
Detailed Explanation
When a country earns more money, its people can buy more goods. Other options are incorrect because This answer suggests that the trading partner will only make things locally; This option thinks income levels don't affect each other.
Key Concepts
Aggregate Demand
Economic Interdependence
Income Levels
Topic
Graphing Economic Impacts
Difficulty
easy level question
Cognitive Level
understand
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