Scenario 33-1
Suppose that political instability in other countries makes people fear for the value of their assets in these countries so that they desire to purchase more U.S assets.
-Refer to Scenario 33-1. What would the change in the exchange rate make happen to U.S. net exports and U.S. aggregate demand?
A)Net exports would rise which by itself would increase U.S.aggregate demand.
B)Net exports would rise which by itself would decrease U.S.aggregate demand.
C)Net exports would fall which by itself would increase U.S.aggregate demand.
D)Net exports would fall which by itself would decrease U.S.aggregate demand.

Question

Quizplus · Accepted Answer

The increase in demand for U.S. assets would appreciate the U.S. dollar, making U.S. goods more expensive abroad and foreign goods cheaper in the U.S. This would decrease U.S. net exports, which by itself would decrease U.S. aggregate demand.

Scenario 33-1 Suppose That Political Instability in Other Countries Makes People Fear