Suppose country A’s goods become more popular with foreign consumers, and country B’s less so. How would this affect each country, assuming that they (a) have their own independent currency and (b) share a common currency? Use the aggregate demand (AD) and aggregate supply (AS) framework to explain your answer, and comment briefly on the desirability of currency union. If you can give an example with countries that would be great.
Suppose country A’s goods become more popular with foreign consumers, and country B’s less so. How would this affect each country, assuming that they (a) have their own independent currency and (b) share a common currency? Use the aggregate demand (AD) and aggregate supply (AS) framework to explain your answer, and comment briefly on the desirability of currency union. If you can give an example with countries that would be great.
Chapter22: International Finance
Section: Chapter Questions
Problem 8QP
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Suppose country A’s goods become more popular with foreign consumers, and country B’s less so. How would this affect each country, assuming that they (a) have their own independent currency and (b) share a common currency? Use the aggregate
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