Question

Suppose there is a reduction in foreign output (Y*). This reduction in Y* will cause which of the following in the domestic country? A) a reduction in output B) a reduction in consumption C) a reduction in net exports D) all of the above E) none of the above

Answer 1

Answer:

The correct answer is  D) all of the above

Explanation:

Lower foreign output  means lower foreign demand. So the direct effect of the decrease in foreign output is a declining  in U.S. exports by some amount.

The economy depends on the output in terms of demands and goods.