Which of the following statements explains the shift of the supply curve(S-I) from S1 to S2 that is higher fro

Question

Which of the following statements explains the shift of the supply curve(S-I) from S1 to S2 that is higher from S1

A recession in Europe reduces the amount of Canadian exports.

B. The world interest rate increases.

C. The Canadian government imposes tariffs on a range of imports.

D. The government budget deficit increases.

Answer 1

You are right -"B" is correct.

If world interest rates increase then Import will fall and Export will remain constant (because demand for currency remains unchanged) thus NX will increase - in order to maintain higher NX with same demand for currency S-I should shift rightward as your graph shows.

http://courses.aplia.com/problemsetasset...

Sorry, first time I just confused Interest rate/Investment,Savings graph with Real exchange rate/Net export graph.