Figure 20.6: Dollar-Euro Exchange Rate (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-In December 2007, the United States entered a recession. As seen in Figure 20.6, the U.S. dollar depreciated about 100 percent vis-á-vis the euro between 2001 and 2007. Explain the relationship between the recession and the depreciation of the dollar. What does the short-run model suggest should happen to net exports and the output gap?

Question

Figure 20.6: Dollar-Euro Exchange Rate  (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-In December 2007, the United States entered a recession. As seen in Figure 20.6, the U.S. dollar depreciated about 100 percent vis-á-vis the euro between 2001 and 2007. Explain the relationship between the recession and the depreciation of the dollar. What does the short-run model suggest should happen to net exports and the output gap?

Quizplus · Accepted Answer

The Answer of Figure 20.6: Dollar-Euro Exchange Rate  (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-In December 2007, the United States entered a recession. As seen in Figure 20.6, the U.S. dollar depreciated about 100 percent vis-á-vis the euro between 2001 and 2007. Explain the relationship between the recession and the depreciation of the dollar. What does the short-run model suggest should happen to net exports and the output gap?

Figure 206: Dollar-Euro Exchange Rate (Source: Federal Reserve Economic Data