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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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BuyFindarrow_forward

Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.

To determine

Impact on employment, price level and output due to increase in investment in United States is to be determined.

Explanation

As foreign wealth-holders are optimistic about the future prospects of United States, it means they are confident about the health of economy. People will invest their savings in United States. This means AD will increase as investment is a component. Increase in investment will increase AD.

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