When a country devalues its currency, we expect that A.income will fall because the devaluation reduces aggregate supply. B. income will rise because the devaluation stimulates aggregate demand. C. income will rise because the devaluation stimulates aggregate supply. D. income will fall because the devaluation reduces aggregate demand.

When a country devalues its currency, we expect that A.income will fall because the devaluation reduces aggregate supply. B. income will rise because the devaluation stimulates aggregate demand. C. income will rise because the devaluation stimulates aggregate supply. D. income will fall because the devaluation reduces aggregate demand.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter29: Exchange Rates And International Capital Flows

Section: Chapter Questions

Problem 25CTQ: If a countrys currency is expected to appreciate in value, what would you think will be the impact...

See similar textbooks

Similar questions

Given the following economic information for Country A (in RM billion): Saving (S) = –500 + 0.3Yd Investment (I) = 400 – 200r Government spending (G) = 500 Taxes (T) = 200 Nominal money supply (Ms ) = 4000 Money demand for transactions (Md t/P) = 0.2Y Money demand for speculations (Md s) = 1600 – 500r Price (P) = 2 di mana Y dan r adalah masing-masing mewakili tingkat pendapatan dan kadar bunga. where Y and r represent the levels of income and interest rate, respectively. Based on the above information, i) . Derive an expression for the IS and LM curve (four decimal point) in Y says. ii) . Calculate the equilibrium levels of income and interest rate (three decimal point).
A European investor lives near one of his country’s borders. In Country A (where he lives), banks are offering an 8% interest rate and the inflation rate is 3%. Country B, on the other hand, has an inflation rate of 23%, and banks are offering 26% interest on deposits. a. What real or effective interest rate does the investor earn when investing in his own country? b. The investor believes that the currency of Country B will not change in its value relative to the value of the currency of Country A during this year. In which country would he get a larger effective interest rate? c. Suppose that he invests in a bank in Country B and that his prediction turns out to be wrong: the currency of Country B was devaluated 20% with respect to the exchange value of Country A’s currency. What effective interest rate would he obtain in this case?
Explain and evaluate the following statements:a. The invention of money is one of the great achievements of humankind, for without it the enrichment that comes from broadening trade would have been impossible.b. Money is whatever society says it is.c. In most economies of the world, the debts of government and commercial banks are used as money. d. People often say they would like to have more money, but what they usually mean is that they would like to have more goods and services.e. When the price of everything goes up, it is not because everything is worth more but because the currency is worth less.f. Any central bank can create money; the trick is to create enough, but not too much, of it.
32. An increase in productivity in a country will cause its currency to ________ because it can produce goods at a ________ price, everything else held constant. Question 32 options: a) appreciate; lower b) depreciate; higher c) appreciate; higher d) depreciate; lower
Currency crises and the demand for dollars: Suppose there is a currency crisisin the rest of the world, leading to an increase in demand for U.S. dollars (a“fight to safety”). Use the AS/AD framework to explain the efects of thisshock on the U.S. economy. Be sure to explain carefully how and why theshock enters the AS/AD model. (Hint: If the rest of the world would likemore dollars, what does it have to give in exchange for those dollars?
b. How do fiscal and monetary policies differ in their approaches to managing the economy during periods of recession? Provide examples of each policy tool.
A central bank can allow its currency to fall indefinitely, but it cannot allow its currency to rise indefinitely. Why not?
59 please quikcly thanks ! If the Bank of Canada raises its target for the overnight interest rate from 3 percent to 3.25 percent while interest rates in other countries do not change, the result is _____ of financial capital, _____ in demand for Canadian dollars and _____ of the Canadian dollar. a.An outflow; an increase; an appreciation. b.An inflow; an increase; a depreciation. c.An inflow; an increase; an appreciation. d.An outflow; a decrease; a depreciation. e.An inflow; a decrease; a depreciation.
It could be said that the USD dollar is most popular currency. There are some countries that have, in some way or another, adapted the USD. a. Identify a country that has gone through the dollarization process. b. How does a country become dollarized? Is there a process? Explain. c. Using examples specific to the country identified in "a," discuss TWO positive impacts and TWO negative impacts that dollarization could have/is having on the country.
When a country's currency appreciates, is this generally good news or bad news for a country's consumers? Is it generally good or bad news for the country's businesses? Explain your reasoning - try to use examples.
Suppose there are two countries in the world, Mexico and the United States. The currency of Mexico is the peso, the currency of the United States is the dollar. On the foreign exchange market, the supply of dollars comes from Oa the demand for pesos Ob. the supply of pesos Oc the demand for dollars O d. There is not enough information given to answer
5 People argue over if a strong dollar or weak dollar is good for the US economy. Is a strong dollar or weak dollar a good thing for the economy? In 400-600 words, explain what you support and why