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

Quizplus · Accepted Answer

In situation 2, the exchange rate appreciates, which makes imports cheaper and exports more expensive. As a result, domestic consumers shift their purchases towards domestically produced goods, thereby increasing output and leading to real GDP growth.

Figure 36-3 ​

Figure 36-3