Aggregate Demand and Aggregate Supply - End of Chapter ProblemA fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners, even thoughthe U.S. aggregate price level remains the same. As a result, foreigners demand more U.S. aggregate output. Your studypartner says that this represents a movement down the aggregate demand curve because foreigners are demanding more inresponse to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve. Who is right and why?Neither of you are right. A fall in the value of the dollar will make imports more expensive for U.S. buyers, eventhough the price level remains the same. Fewer goods will be demanded from the U.S. economy at a given price level,so aggregate demand shifts to the left.You are right. The price level of the United States has stayed the same, but foreign buyers are demanding more goodsfrom the United States. Since more goods are being demanded at a given price level, aggregate demand has shiftedrightward.Both of you are right. The aggregate demand curve will shift to the right, and there will be movement down theaggregate demand curve.Your partner is right. Since the aggregate quantity of goods demanded increases as a result of a price change, thisdevelopment constitutes a movement along the aggregate demand curve.Neither of you are right. The price level in the United States has not changed, so U.S. consumers face the sameincentives as before. There is no movement along the aggregate demand curve and no shift in the aggregate demandcurve.

AD:Aggregate Demand is when the total number of consumers have the desire to buy something at the…

Aggregate Demand and Aggregate Supply - End of Chapter Problem A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners, even though the U.S. aggregate price level remains the same. As a result, foreigners demand more U.S. aggregate output. Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve.

Aggregate Demand and Aggregate Supply - End of Chapter Problem A fall in the value of the dollar against other currencies makes U.S. final goods and services cheaper to foreigners, even though the U.S. aggregate price level remains the same. As a result, foreigners demand more U.S. aggregate output. Your study partner says that this represents a movement down the aggregate demand curve because foreigners are demanding more in response to a lower price. You, however, insist that this represents a rightward shift of the aggregate demand curve.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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