00:02
So let's go over this question.
00:51
So initially both show the canadian economy producing at full employment output.
00:56
The exchange rate between the us dollar and canadian dollar rises.
01:02
So we need to show the short run and long run impact.
01:08
So the us dollar has appreciated and the canadian dollar has depreciated.
01:18
So when we have a depreciation in domestic currency, canadian exports will increase because now it's cheaper to buy the goods from canada.
01:52
The imports will decrease because the canadian dollar is no longer as strong.
01:58
So the imports become more expensive.
02:02
Higher net exports therefore will increase aggregate demand and in the short run our aggregate demand curve is going to shift to the right.
02:11
Then the price level rises and output rises.
02:19
So we just need to show this shifting to the right.
02:26
So you could see how the price level is going to go up and output is also going to go up...