Question

What are some of the ways in which exports and imports can affect the AD/AS model?

Short answer

Price levels and Real GDP both rise as a result of the rightward shift.

Step-by-step solution

Introduction 

Exports- Goods and services produced in one country and sold to buyers in another are known as exports.

Import- An import is a product or service purchased in one country but made in another.

Explanation

Aggregate demand includes both exports and imports. Net Exports, or the difference between exports and imports, is a component of foreign commerce in an economy.

As exports or imports rise or fall, AD rises, pushing the AD curve to the right.

The aggregate demand curve shifts rightward from AD0 to AD1 in the diagram above. Price levels and Real GDP both rise as a result of the rightward shift. However, the new equilibrium is still a long way from potential GDP or full employment output levels.