Figure 13-1 -Refer to Figure 13-1.Ceteris paribus,an increase in the value of the domestic currency relative to foreign currencies would be represented by a movement from A)AD₁ to AD₂. B)AD₂ to AD₁. C)point A to point B. D)point B to point A.

Question

Quizplus · Accepted Answer

An increase in the value of the domestic currency relative to foreign currencies would mean that foreign goods and services become cheaper and domestic goods and services become more expensive, causing a decrease in exports and an increase in imports. This would shift the AD curve to the right, leading to a higher level of output but also a higher price level. Therefore, there would be a movement from AD₂ to AD₁, as shown in the diagram.

Figure 13-1 -Refer to Figure 13-1.Ceteris Paribus,an Increase in the Value of the Value