Question

Suppose that foreigners had reduced confidence in u.s. financial institutions and believed that privately issued u.s. bonds were more likely to be defaulted on.refer to u.s. financial crisis. u.s. net exports would

a. fall which by itself would increase aggregate demand.b. rise which by itself would increase aggregate demand.c. fall which by itself would decrease aggregate demand.

Answer 1

The answer is B. rise which by itself would increase aggregate demand

Step-by-step explanation:

Net export is the difference between a country's total export and a country's total import.

The net export figure is used to calculate the national demand for goods produced within the economy.

Since foreigners have reduced their confidence in US Financial Institution, this will reduce the number of investments in the country and this makes the price level of commodities to drop

And all other things remaining equal, lower price level encourages exports and reduces imports.