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PQ 27
How does an appreciation of a country's currency affect its
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- Consider the relationship among exchange-rate changes, aggregate demand, and monetary policy. Assume we begin in a situation with real GDP equal to Y∗.Y*. Suppose the world price for raw materials rises because of growing demand for these products. Given that Canada is a net exporter of raw materials, what is the likely effect on Canadian aggregate demand? Show this in an AD/AS diagram (assuming no change in the exchange rate). Suppose instead that there is an increase in the demand by foreigners for Canadian financial assets such as government bonds. What is the direct effect on Canadian aggregate demand? Show this in an AD/AS diagram (assuming again no change in the exchange rate). Both of the shocks described above are likely to cause an appreciation of the Canadian dollar on foreign-exchange markets. As the Canadian dollar appreciates, what are the effects on aggregate demand in part (a) and in part (b)? Show these “secondary” effects in your diagram and explain. Given your…With respect to their impact on aggregate demand for the U.S. economy, which of the following represents the cor-rect ordering of the wealth effect, interest-rate effect, and exchange-rate effect from most important to least im-portant?a. wealth effect, exchange-rate effect, interest-rate effectb. exchange-rate effect, interest-rate effect, wealth effectc. interest-rate effect, wealth effect, exchange-rate effectd. interest-rate effect, exchange-rate effect, wealth effect"In an economy with a high dependency on imported oil, what is the likely macroeconomic impact of a sustained and significant increase in global oil prices? A) An immediate improvement in the trade balance due to Increased export revenues. B) A decrease in inflation as higher oil prices lead to reduced consumer spending. C) An increase in the general price level and potential deterioration of the trade balance. D) Stabilization of the currency value due to increased demand for domestic currency to purchase oil.
- b56 QUESTIONS GO WITH CHART 1. Which of the following could have caused the AD curve to shift from ADo to AD1 in Figure B? a) decrease in net exports b) decrease in business confidence c) increase in taxes d) All of the above. e) None of the above. 2. Possible causes of the shift in AS from ASo to AS1 in Figure D, include: a) an embargo on petroleum imports to this economy. b) a "tight money" policy of the Federal Reserve. c) higher wage demands by labor unions. d) all of the above. e) (a) and (c) only 3. Assuming that subscript "o" signifies the original position and subscript "1" the new position of the curves, which of these graphs depicts the scenario of a classical recession? a) Figure A b) Figure B c) Figure C d) Figure DWhich of the following would increase current Aggregate Demand in an country? Select one: a) Highest interest rates b) Avaialbel of less savings schemes c) Falling growth d) Higher taxes e) Precautionary savings18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal.
- 18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.Suppose the government provides incentives (e.g. lower company tax) to firms that engage in high levels of research and development.How would this affect firms’ allocation between different types of investment? Explain. How would this affect the interest rate? Explain. What happens to the quantity of investment overall? Explain.What happens to the short-run aggregate supply curve? Explain. What happens to the long-run aggregate supply curve? Explain. What happens to the value of the dollar? Explain.g What happens to the quantity of net exports demanded? Explain.h What happens to aggregate demand? Explain.What is the intermediate zone of the SRAS curve? Will a rise in output be accompanied by a rise or a fall in the price level in this zone?
- 4. How does a decrease in foreign price levels affect domestic aggregate expenditures and demand?Suppose the government decides to increase taxes by $30 billion in order to increaseSocial Security benefits by the same amount. How will this combined tax-transfer policyaffect aggregate demand at current prices?Answer only D &E ( No need to answer a,b,c) 18. Using AS-AD diagrams, illustrate each of the following economic situations by showing the patterns and shifts of either AS or AD that could cause them to happen: a. a rise in the price level triggered by higher oil prices; b. a rise in inflation that happens four years in a row because government spending keeps increasing; c. foreign investors gain confidence and increase the level of investment in the U.S. economy; d. the economies of trading partners grow very slowly, leading to a decrease in exports to those countries e. output declines slightly but the price level falls a great deal. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
