Suppose the economy is operating below the natural level of output. Discuss the arguments for and against using a devaluation in such a situation
What will be an ideal response?
With a devaluation, Y returns to the natural level much more rapidly. This would cause an increase in NX, an increase in demand, and an increase in Y. Graphically, the AD curve would shift to the right. Economy self-corrects. This is an advantage. However, with a devaluation, individuals might begin to doubt the country's commitment to a fixed exchange rate regime. This could lead to an exchange rate crisis.
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Figure 3-8
In , if the initial demand and supply for soybeans were D1 and S1, how would a decrease in the cost of producing soybeans affect the market for soybeans?
a.
Demand would increase to D2, price would increase to P2, and the quantity would increase to S.
b.
Supply would increase to S2, price would decrease to P0, and the quantity would increase to S.
c.
Both demand and supply would increase so the price would remain at P1, but the quantity would increase to T.
d.
None of the above would occur.
Which of the above shows the correct relationship between demand and marginal revenue for an imperfectly competitive firm?
A. A B. B C. C D. D
Suppose that consumers expect that the price of a product will increase in the future. The result is that:
A. the current demand for the product increases. B. the current demand for the product decreases. C. the current supply of the product increases. D. the current supply of the product decreases.
Suppose that Mel (who is 27 ) is not working, but looked for a job as recently as 2 months ago. Mel would like a job and he is available for work. He is considered
A) unemployed. B) a member of the labor force and unemployed. C) a member of the labor force, but not unemployed. D) a member of the working-age population E) a marginally attached worker.