Question : Statement 1: An increase in exports will lead to a shift in aggregate demand.
Statement 2: An increase in consumer confidence will lead to a shift in aggregate supply.
Which statement is correct?
Option 1: Only Statement 1
Option 2: Only Statement 2
Option 3: Both Statement 1 and Statement 2
Option 4: Neither Statement 1 nor Statement 2
Correct Answer:
Only Statement 1
Solution : The correct answer is (A) Only Statement 1
Statement 1 is correct. Exports are a component of aggregate demand, and an increase in exports represents an increase in demand for a country's goods and services from abroad. This leads to an expansion of aggregate demand and can have positive effects on economic growth.
Statement 2 is incorrect. Consumer confidence primarily influences consumer spending, which is a component of aggregate demand. It does not directly impact aggregate supply, which is determined by factors such as technology, resources, and production capacity.
Therefore, the correct answer is A) Only Statement 1.
