Suppose output is above the natural level of output. In a fixed exchange rate regime, explain the two ways the economy can return to the natural level of output
What will be an ideal response?
Revaluation. Policy makers could revalue the currency. This would cause a reduction in NX, and reduction in demand, and a reduction in Y. Graphically, the AD curve would shift to the left. Economy self-corrects. With Y above the natural level, the expected price level (or expected inflation) will rise causing W to rise. As W rises, P will rise. As P rises, a real appreciation occurs and NX falls. We would move along the AD curve.
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Since 1999, the number of small state-owned enterprises (SOEs) in China has
A) decreased, but the large SOEs continue to hold a large proportion of industrialized assets. B) increased, but large SOEs has decreased. C) decreased along with the large SOEs. D) remained unchanged.
Which would be considered an investment according to economists?
A. The purchase of newly issued shares of stock in Microsoft. B. The sale of government bonds by the nation's central bank. C. The construction of a new computer chip factory by Intel. D. The purchase of shares of stock by Fidelity, a mutual fund company.
Along a short-run aggregate supply curve, which of the following is (are) held constant?
A. aggregate demand B. input prices C. real GDP D. relative prices of goods and services
If a tax is placed on perfectly competitive firms that impose external costs on society, the firm's ________ curve will shift up and the industry ________ curve will shift to the left.
A. marginal benefit; supply B. marginal cost; supply C. marginal benefit; demand D. marginal cost; demand