Figure 20.9: Dollar-Euro Exchange Rate
-In December 2007, the United States entered a recession. As seen in Figure 20.9, the U.S. dollar depreciated about 100 percent vis-á-vis the euro between 2001 and 2007. Explain the relationship between the recession and the depreciation of the dollar. What does the short-run model suggest should happen to net exports and the output gap?

Question

Figure 20.9: Dollar-Euro Exchange Rate  
-In December 2007, the United States entered a recession. As seen in Figure 20.9, the U.S. dollar depreciated about 100 percent vis-á-vis the euro between 2001 and 2007. Explain the relationship between the recession and the depreciation of the dollar. What does the short-run model suggest should happen to net exports and the output gap?

Quizplus · Accepted Answer

The Answer of Figure 20.9: Dollar-Euro Exchange Rate  
-In December 2007, the United States entered a recession. As seen in Figure 20.9, the U.S. dollar depreciated about 100 percent vis-á-vis the euro between 2001 and 2007. Explain the relationship between the recession and the depreciation of the dollar. What does the short-run model suggest should happen to net exports and the output gap?