Homework Answers
Answer 23
The correct answer is (b) AD would decrease.
The reduction in business investment will result in investors to invest more and hence investment will decrease and thus AD will also decrease.
The imposition of tariffs means that not Foreign have to pay more for the domestic good and hence they will buy less of domestic goods and thus Exports will decrease and thus Net exports will decrease which will also result in decrease in AD. Hence Both the changes result in decrease in AD and hence AD will decrease.
Hence, the correct answer is (b) AD would decrease.
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