Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or to the left?). Also determine the effect on the price level, the real output level and employment/unemployment. Provide an explanation and express this graphically using the AS/AD macro model.
From 1980 to 1985, the U.S. dollar appreciated over 60%. An appreciation of a country's currency makes its goods more expensive relative to foreign goods. This reduces its exports and increases its imports, shifting its AD curve to the left.
Determine the effect on either the aggregate demand curve (is it a rightward or a leftward shift?), the aggregate short-term supply curve, and the long-term aggregate supply curve (does the upward sloping portions of the SAS curve shift left or right, or does the vertical portion of the LAS curve shift to the right or to the left?). Also determine the effect on the price level, the real output level and employment/unemployment. Provide an explanation and express this graphically using the AS/AD macro model.
From 1980 to 1985, the U.S. dollar appreciated over 60%. An appreciation of a country's currency makes its goods more expensive relative to foreign goods. This reduces its exports and increases its imports, shifting its AD curve to the left.
