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Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460

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BuyFindarrow_forward

Economics:

10th Edition
BOYES + 1 other
Publisher: Cengage Learning
ISBN: 9781285859460
Chapter 8, Problem 3E
Textbook Problem
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How does an increase in foreign income affect domestic aggregate expenditures and demand? Draw a diagram to illustrate your answer.

To determine

The impact of foreign income on domestic aggregate expenditure and demand along with diagram.

Explanation of Solution

If income in the foreign country rises, a part of it will spent be on imports since they will demand more of foreign goods and services. Therefore, the export demand for domestic goods and services in the domestic country will rise. This means the aggregate demand in the domestic country will rise too, for each price level along with aggregate expenditure...

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