Movements in exchange rates can have a powerful effect on incentives to export and import, and thus on ________________ in the economy as a whole. Question 29 options: 1) aggregate supply 2) aggregate demand 3) direct investments 4) portfolio investments
Added by Joseph K.
Step 1
The question is about how exchange rate movements affect trade, specifically exports and imports, and how this impacts the overall economy. Show more…
Show all steps
Your feedback will help us improve your experience
Aparna Shakti and 82 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Which of the following factors will shift aggregate demand curve to the right ? 1.A decrease in the general price level 2.An increase in real interest rates 3.An increase in national income abroad 4.A decrease in the value of financial assets
Aparna S.
Question 2 (a) One among the three reasons for the aggregate demand curve to be downward sloping is the so-called exchange-rate effect (as we will learn in Ch 33), which means specifically that there is negative relation between the price level (P) and the net export (NX). Explain the exchange-rate effect using the three-panel diagram for the open economy. Make sure that all the changes in the loanable fund market, the NCO, and the currency exchange market are clearly stated in your answer. (b) Country X is rather unique in that it has plenty reserves of a kind of mineral. This kind of mineral was deemed to have little value previously, but now become highly valuable for containing a key ingredient in making a newly invented and much improved kind of power battery. Big firms around the world are in talk with Country X government about possible direct investment in Country X for the extraction and processing of the material; and some are close to a final deal and expect to start their FDI projects in Country X next year. Explain with the aid of a three-panel diagram how Country X will be affected next year by the said events. Indicate in your explanation how the following will change as a result: interest rate, loanable fund saved and invested, net capital outflow, real exchange rate, and net export.
Shu N.
As a result of a decrease in the value of the dollar in relation to other currencies, American imports decrease and exports increase. Consequently, there is a(n): a. decrease in the quantity of aggregate output supplied in the short run. b. increase in short-run aggregate supply. c. decrease in the quantity of aggregate output demanded. d. increase in aggregate demand.
Nick J.
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD
