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Chapter 20: Q 3. (page 546)

“The appreciation of the dollar from 2012 to 2017 had a negative effect on aggregate demand in the United States.” Is this statement true, false, or uncertain? Explain your answer.

Short Answer

Expert verified

The statement is true.

Step by step solution

01

Step 1. Define aggregate demand and aggregate supply.

The total quantity of demand for all finished products and services generated in an economy is measured as aggregate demand.

Aggregate supply, often known as total production, is the whole supply of goods and services produced within an economy in a given period at a specific overall price.

02

Step 2. Is the given statement is true or false.

The assertion is correct. An increase in the appreciation of the US dollar reduces net exports, and the aggregate demand curve changes downward and to the left, lowering output, according to the aggregate demand and supply analysis.

A appreciation in the value of the US dollar makes US exports less profitable in the worldwide market. Because exports are a component of aggregate demand, a drop in exports reduces overall demand.

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Most popular questions from this chapter

Both the portfolio choice and Keynes’s theories of the demand for money suggest that as the relative expected return on money falls, demand for it will fall. Why does the portfolio choice approach predict that money demand is affected by changes in interest rates? Why did Keynes think that money demand is affected by changes in interest rates?

In the aftermath of the financial crisis in the United States, labor mobility has decreased significantly. How, if at all, might this affect the natural rate of unemployment?

Calculate what happens to nominal GDP if velocity remains constant at 4and the money supply increases from \(250billion to\)375 billion.

Identify three factors that can shift the aggregate demand curve to the right and three different factors that can shift the aggregate demand curve to the left.

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