The effects of currency appreciation by using an aggregate supply -demand diagram.

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Answer 1

Question

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.

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Students have asked these similar questions

Which of the following is likely to occur for the United States, if the US dollar loses strength relative to the Japanese yen, ceteris paribus? A- Aggregate demand will decrease (shift left) B- Aggregate demand will increase (shift right) C- Aggregate supply will increase (shift right) D- Aggregate supply will decrease (shift left)

In the overshooting model, an increase in the money supply leads to higher inflation and currency depreciation. Can you think of a situation where higher inflation could lead to currency appreciation?

Answer 2

Question

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.

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Answer 3

Question

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.

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Answer 4

Question

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.

Answer 6

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.

Answer 7

Chapter 20, Problem 1TY

To determine

To Analyze: The effects of currency appreciation by using an aggregate supply-demand diagram.

Answer 8

Expert Solution & Answer

Explanation of Solution

The relationship between supply of quantity and cost of goods or services, when represented graphically, it is called a supply curve. The point at which the supplied quantity equals the demanded quantity, then that is called an equilibrium price and equilibrium quantity.

Below shown is the diagram that represents the appreciation of currency in an economy.

MACROECON LOOSE-LEAF W/MINTAP, Chapter 20, Problem 1TY

In the above mentioned graph the real GDP is being represented by the x−axis and the price level is being represented by the y−axis . The demand curve D is sloping downwards and the supply curve S is sloping upwards. The equilibrium point is being represented by the intersection of the demand curve and the supply curve. With the appreciation of currency, there will be a decrease in net exports and hence a leftward shift in the aggregate demand curve. While at the same time, imports will cost cheaper because of which the aggregate supply curve shifts downwards from S to S1. Thus there will be a fall in the price equilibrium level from e to e1 whereby the output level and price level reduces.