Question

What would be the effect of an increase in U.S. net exports on the aggregate demand curve? Would an increase in net exports affect the monetary policy curve? Explain.

Short answer

An increase in net exports will directly affect the combination demand curve because it causes planned expenditure to extend. So, the equilibrium within the market will shift, which suggests aggregate demand will increase.

This change within the aggregate demand curve will be seen within the figure 1 given below where aggregate demand curve shift to its right from $A{D}_1$ to$A{D}_2$ with effect from increase in net exports.

Step-by-step solution

Concept Introduction 

Monetary Policy is formulated by financial organisation to keep up the interest rates and finances within the economy. financial institution operates monetary policy so on attain appropriate rate, consumption level, growth and liquidity rate within the economy. Net export is that the value of total exports done by a rustic minus its imports.

$\text{NetExport = Exports - Imports}$

Explanation of Solution 

An increase in net exports will directly affect the combination demand curve because it causes planned expenditure to extend. So, the equilibrium within the market will shift, which suggests aggregate demand will increase.

This change within the aggregate demand curve will be seen within the figure 1 given below where aggregate demand curve shift to its right from $A{D}_1$to$A{D}_2$ with effect from increase in net exports.

However, monetary policy curve explain the link between interest rates and pecuniary resource, increase in net exports won't leads to any change within the monetary policy curve.