Using a graph, show the effects of a weaker dollar on the economy. Explain
What will be an ideal response?
The original equilibrium is where AD1 intersects AS1. A weaker dollar causes aggregate supply to decrease, represented by a shift from AS1 to AS2. But the weaker dollar makes imports more expensive and exports cheaper, so aggregate demand increases from AD1 to AD2. The new equilibrium is where AD2 intersects AS2, with an increase in real Gross Domestic Product (GDP) and a rise in the price level. This result is due to the fact that aggregate demand shifted further than aggregate supply. Real Gross Domestic Product (GDP) would have fallen if the shift in aggregate supply had been greater than the shift in aggregate demand.
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Starting from long-run equilibrium, an increase in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. lower; higher D. higher; potential
In the short run, which one of the following causes a competitive firm to hire more labor?
A) an increase in wage rate B) an increase in the output price C) a specific tax imposed on the firm's output D) a decrease in the output price
An increase in the money supply leads to a(n):
a. decline in interest rates, an increase in investment, and an increase in aggregate demand. b. decline in interest rates, a decrease in investment, and an increase in aggregate demand. c. decline in interest rates, an increase in investment, and a decline in aggregate demand. d. increase in interest rates, an increase in investment, and an increase in aggregate demand. e. decline in interest rates, a decline in investment, and a decline in aggregate demand.
Recall the Application about craft beer and the increase in the price of hops to answer the following question(s).Recall the Application. Because hops are inputs in the production of beer, an increase in the production of beer resulted in:
A. an increase in the demand for hops. B. a decrease in the demand for hops. C. an increase in the quantity demanded for hops. D. a decrease in the quantity demanded for hops.