11-12. Consider an open economy in which the aggregate
11-12. Consider an open economy in which the aggregate |
supply curve slopes upward in the short run. |
Firms in this nation do not import raw materials |
or any other productive inputs from abroad, but |
foreign residents purchase many of the nation’s |
goods and services. What is the most likely shortrun |
effect on this nation’s economy if there is a |
significant downturn in economic activity in |
other nations around the world? (See page 243.) |
this economy is an exporter. The exports depend on demand frm other nations. When these nations havea downturn in economic activity demand will decline. |
this implies a decrease in imports, which translates into decline in exports for our nation. |
this will reduce aggregate demand, so that GDP will decline in short run. |
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