8. What are the economic effects of a currency depreciation? a. It will decrease

Question

8. What are the economic effects of a currency depreciation? a. It will decrease aggregate demand and aggregate supply, so that output will certainly fall, and prices may fall b. It will increase aggregate demand and aggregate supply, so that output will certainly rise, and prices mayrise c. It will increase aggregate demand and decrease aggregate supply,so that pices will certainly rise and output d. It will decrease aggregate demand and increase aggregate supply, so that prices will certainly fall and output as well as well may rise as well may fall as well. a. 15 cents. b.57 cents c. 62 cents d. $15.70. 10. How does a budget deficit lead to a trade deficdt? a. The trade deficit tiggers higher interest rates, which increase the budget deficit b. The budget deficit leads to higher interest rates and exchange rates, which shrink net exports C. The trade deficit causes lower interest rates, which leads to economic recession and a budget deficit d. The budget deficit causes lower exchange rates, which decreasenet exports 11. A currency appreciation is disinflationary and contractionary if the a. inward shift of the aggregate demand curve due to the fall in exports exceeds the outward shift of the b.outward shift of the aggregate demand curve due to the rise in exports exceeds the outward shift of the c. outward shift of the aggregate demand curve due to the fall in exports exceeds the inward shift of the d inward shift of the aggregate demand curve due to lower input prices exceeds the outward shift of the aggregate supply curve due to lower input prices. aggregate supply curve due to lower input prices aggregate supply curve due to higher input prices aggregate supply curve due to the rise in exports

Explanation / Answer

8. What are the economic effects of a currency depreciation?
c) It will increase aggregate demand and decrease aggregate supply, so that prices will certainly rise and output may rise as well.
Currency depreciation makes exports cheaper and more competitive in market and it reduces supply as exports increases and therfore the prices of goods will increase due to less supply and so the production also increases due to increased demand.

9.If the exchange rate of swiss franc is 1.60 francs per dollar, then the swiss franc is worth about
c) 62 cents

10.How does a budget deficit lead to a trade deficit?
b) The budget deficit leads to higher interest rates and exchange rates, which shrinks the net exports
Budget deficit causes higher interest rates and it makes bonds and other assets more costly, so exports reduces and there is trade deficit.

11.A currency appreciation is disinflationary and contrationary if the
a) inward shift of the aggregate demand curve due to the fall in exceeds the outward shift of the aggregate supply curve due to lower input prices.

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