Macro Foundations · intro
What moves on the Aggregate Supply – Aggregate Demand diagram
Exports are a component of AD; stronger foreign demand raises NX and shifts AD right.
Start at equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change..
Foreign income growth raises demand for this country's exports.
Net exports (NX) rise at every domestic price level. AD shifts right.
New equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change.: higher output and price level.
Examiners ask this as: export boom, foreign demand rises, trading partner growth, commodity export demand, china buys more.
Other scenarios on Aggregate Supply – Aggregate Demand