Imagine that the economy is at a point that is below both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE? The exchange rate will first increase to a point on the AA schedule. The exchange rate will first move to a point on the DD schedule. The output will directly decrease. The output will directly increase. The economy will stay at this level in the short run.
Imagine that the economy is at a point that is below both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE? The exchange rate will first increase to a point on the AA schedule. The exchange rate will first move to a point on the DD schedule. The output will directly decrease. The output will directly increase. The economy will stay at this level in the short run.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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D4)
Finance
Imagine that the economy is at a point that is below both AA and DD, where both the output and asset markets are out of equilibrium. Which first action is TRUE?
The exchange rate will first increase to a point on the AA schedule.
The exchange rate will first move to a point on the DD schedule.
The output will directly decrease.
The output will directly increase.
The economy will stay at this level in the short run.
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