To Analyze: The effects of currency appreciation by using an
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
Below shown is the diagram that represents the appreciation of currency in an economy.
In the above mentioned graph the real GDP is being represented by the
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- What does it mean when the dollar appreciates compared to when the dollar depreciates? Has the US dollar been relatively strong or weak over the past year? How does the strength of the dollar affect exports and imports?arrow_forwardWill a direct increase in the price of U.S. goods relative to foreign goods lead to a change in the quantity demanded of Real GDP or to a change in Aggregate Demand? Will a change in the exchange rate that subsequently increases the price of U.S. goods relative to foreign goods lead to a change in the quantity demanded of Real GDP or to a change in Aggregate Demand?arrow_forwardConstruct a model that shows how – in the longer run – money supply and demand as well as the dollar return on foreign assets determine the exchange rate.arrow_forward
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