If exports rise, what happens to aggregate demand in the short run?

• A. Net exports increase, which raises aggregate demand.
• B. Net exports decrease, which lowers aggregate demand.
• C. Net exports have no effect on aggregate demand.
• D. Net exports always equal zero.

Answer: (A)

This question is about how net exports influence aggregate demand in the short run. Aggregate demand is the total spending on domestically produced goods and services, and it includes net exports as a component: AD = C + I + G + NX, where NX = exports minus imports.

When exports rise, foreign buyers are spending more on domestic goods. That increases the amount of spending flowing into the economy from abroad, so net exports rise. Because net exports are part of aggregate demand, an increase in NX pushes AD to the right. In the short run, with prices sticky, this rightward shift typically leads to higher real GDP and a higher price level.

So, the best interpretation is that net exports rise, which raises aggregate demand. The other ideas—net exports decreasing, having no effect, or being forced to zero—do not align with the fact that an increase in exports adds to overall spending on domestic goods.