Suppose there is a reduction in foreign output (Y*). This reduction in Y * will cause which of the following in the domestic country? A) a reduction in output B) a reduction in consumption C) a reduction in net exports D) all of the above E) none of the above

The correct answer is D) all of the above

Explanation:

Lower foreign output means lower foreign demand. So the direct effect of the decrease in foreign output is a declining in U. S. exports by some amount.

The economy depends on the output in terms of demands and goods.