Suppose the Rest of the World Experiences a Recession That

Multiple Choice

Suppose the rest of the world experiences a recession that causes a reduction in foreign income (Y*) .From the domestic economy's perspective,this reduction in foreign income will cause which of the following as the domestic economy adjusts to the drop in Y*?

A) a reduction in income and a reduction in imports
B) a reduction in imports and an increase in net exports
C) the NX line to shift up
D) an ambiguous effect on net exports