Suppose the Brazilian currency, the real, depreciates significantly. The AS/AD model predicts that this would cause a trade:
A)deficit for Brazil and shifted its AD curve left.
B)surplus for Brazil and shifted its AD curve left.
C)deficit for Brazil and shifted its AD curve right.
D)surplus for Brazil and shifted its AD curve right.

Question

Quizplus · Accepted Answer

When the Brazilian real depreciates, Brazilian goods become cheaper for foreigners, leading to an increase in exports. This would likely result in a trade surplus for Brazil. Additionally, the increase in demand for Brazilian goods would shift the Aggregate Demand (AD) curve to the right, indicating an increase in overall demand in the economy.

Suppose the Brazilian Currency, the Real, Depreciates Significantly