Using the ZZ/Y and NX graphs, illustrate graphically and explain what effect an increase in government spending will have on output, exports, imports, and net exports. Clearly label all curves and clearly label the initial and final equilibria

What will be an ideal response?

An increase in government spending will cause ZZ to shift up as demand rises. Y will increase causing an increase in C and S. As Y rises, imports will rise. Given that exports do not change, net exports will decrease.