Figure 36-3

Which of the situations illustrated in Figure 36-3 shows the effects of a currency appreciation leading to real GDP growth?

Question

Figure 36-3

Which of the situations illustrated in Figure 36-3 shows the effects of a currency appreciation leading to real GDP growth?

Quizplus · Accepted Answer

Situation 2 shows an increase in net exports (X-M), which leads to an increase in aggregate demand (AD) and real GDP growth. This is due to the currency appreciation making exports relatively more expensive and imports relatively cheaper, resulting in an increase in exports and a decrease in imports, thus increasing net exports. Situations 1, 3, and 4 do not show the effects of a currency appreciation leading to real GDP growth.

Figure 36-3 Which of the Situations Illustrated in Figure 36-3 Shows the 36-3