Figure 10-2

-Refer to Figure 10-2.If the economy is currently at full-employment equilibrium and there is an increase in the value of the Canadian dollar,what will the short-run equilibrium be?

Question

Figure 10-2
 
-Refer to Figure 10-2.If the economy is currently at full-employment equilibrium and there is an increase in the value of the Canadian dollar,what will the short-run equilibrium be?

Quizplus · Accepted Answer

The increase in the value of the Canadian dollar will lead to an appreciation of the currency, making Canadian exports more expensive and imports cheaper. This will lead to a decrease in net exports and a shift of the aggregate expenditure curve to the left, resulting in a short-run equilibrium at E3.

Figure 10-2 -Refer to Figure 10-2.If the Economy Is Currently at Full-Employment