ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Depreciation of currency, Shift of AD to the left
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Depreciation of currency, Shift of AD to the right
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Appreciation of currency, Shift of AD to the right
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Appreciation of currency, Shift of AD to the left
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Detailed explanation-1: -If the exports of a country exceed its imports, the country is said to have a favourable balance of trade, or a trade surplus. Conversely, if the imports exceed exports, an unfavourable balance of trade, or a trade deficit, exists.
Detailed explanation-2: -Effects of Currency Appreciation Export costs rise: If the U.S. dollar appreciates, foreigners will find American goods more expensive because they have to spend more for those goods in USD. That means that with the higher price, the number of U.S. goods being exported will likely drop.
Detailed explanation-3: -Appreciation of domestic currency means lower price of foreign currency in terms of domestic currency. This increases the price of domestic goods for foreign buyers. This means imports become cheaper. As a result the demand for imports may rise.
Detailed explanation-4: -A trade surplus contributes to economic growth in a country. When there are more exports, it means that there is a high level of output from a country’s factories and industrial facilities, as well as a greater number of people that are being employed in order to keep these factories in operation.