Define devaluation and use a figure to show the effect of a currency devaluation on the economy
What will be an ideal response?
A devaluation occurs when the central bank raises the domestic currency price of foreign currency. In the figure, the domestic currency is devalued from to . Since nothing in the DD schedule has changed, the new equilibrium at point 2 must be reached by an expansion of the money supply (AA curve shifts outward). Notice also that output has increased from to .
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Suppose your tastes can be represented by the utility function 
. Your demand function for 
is
A.
.B.
.C.
D.
An increase in the price level is called
a. the Consumer Price Index b. inflation c. deflation d. stagflation e. nominal pricing
During the past 200 years, income per person has
What will be an ideal response?
An appreciation of the dollar makes imported inputs cheaper and shifts the U.S. aggregate supply curve outward, thus pushing American prices down.
Answer the following statement true (T) or false (F)