Question 1

When the value of the dollar decreases, the net effect on the economy
A) will be an increase in short-run aggregate supply and a decrease in aggregate demand.
B) will be decrease in short-run aggregate supply and an increase in aggregate demand.
C) will be an increase in both aggregate demand and aggregate supply.
D) will be a decrease in both aggregate demand and aggregate supply.

Accepted Answer

When the value of the dollar decreases, it means that it is weaker in comparison to other currencies, which results in higher prices for imports and lower prices for exports. This leads to a decrease in short-run aggregate supply as import prices increase and a shift towards higher aggregate demand as exports become cheaper.

Question 2

When the value of the dollar increases, the net effect on the economy
A) will be an increase in short-run aggregate supply and a decrease in aggregate demand.
B) will be decrease in short-run aggregate supply and an increase in aggregate demand.
C) will be an increase in both aggregate demand and aggregate supply.
D) will be a decrease in both aggregate demand and aggregate supply.

Accepted Answer

When the value of the dollar increases, it makes imports cheaper and exports more expensive. This tends to decrease aggregate demand because domestic consumers can buy foreign goods more cheaply, and foreign consumers are less likely to buy domestic goods. It can increase short-run aggregate supply because the cost of imported inputs decreases, making it cheaper for businesses to produce goods and services.

Question 3

-Refer to the above figure. If the aggregate demand curve shifts beyond AD₅, then the economy will experience A) demand-pull inflation. B) cost-push inflation. C) structural inflation. D) stagflation.

Accepted Answer

When the aggregate demand curve shifts beyond AD5, it indicates an increase in overall demand, leading to demand-pull inflation, where prices rise due to higher demand in the economy.

Question 4

What effect does a stronger dollar have on aggregate supply? Why?

Accepted Answer

The answer of What effect does a stronger dollar have...

Question 5

Using a graph, show the effects of a weaker dollar on the economy. Explain.

Accepted Answer

The answer of Using a graph, show the effects of...

Quiz 11: Classical and Keynesian Macro Analyses

When the value of the dollar decreases, the net effect on the economy

When the value of the dollar increases, the net effect on the economy

-Refer to the above figure. If the aggregate demand curve shifts beyond AD5, then the economy will experience

What effect does a stronger dollar have on aggregate supply? Why?

Using a graph, show the effects of a weaker dollar on the economy. Explain.

-Refer to the above figure. If the aggregate demand curve shifts beyond AD₅, then the economy will experience