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An increase in net exports will shift the AD curve to the:

A) left by a multiple of the change in investment.
B) left by the same amount as the change in investment.
C) right by the same amount as the change in investment.
D) right by a multiple of the change in investment.

User Sikora
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Final answer:

An increase in net exports triggers a rightward shift in the aggregate demand curve by a multiple of the change due to the multiplier effect.

Step-by-step explanation:

An increase in net exports would lead to a rightward shift in the aggregate demand (AD) curve. This shift occurs because an increase in net exports raises the components of aggregate demand: C (consumption), I (investment), G (government spending), and X-M (exports minus imports).

Furthermore, the shift in the AD curve is typically by a multiple of the change in net exports, due to the multiplier effect. This means that for every unit increase in net exports, the AD curve will shift to the right by more than that same unit, as the initial increase in spending circulates through the economy and creates additional income and spending. Therefore, the correct answer to the question is D) Right by a multiple of the change in investment.

User Jmdecombe
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