1 USD was trading for 114 Japanese yens on December 9, 2021, and then the value of USD increased to 150 U.S. Japanese yens on October 20, 2022. How would this change affect U.S. exports to Japan: the demand for US goods and services by Japan? How would this change affect U.S. aggregate demand curve?

1.4

7. Consider the following classical economy: Desired consumption Cd Desired investment Id Government purchases G Net exports NX Real exchange rate e = 300+0.5Y - 200r = 200-300r. = 100 = 150 0.1Y 0.5e = 20+ 600r Full-employment output Ỹ = 900 (a) In this economy, the real interest rate does not deviate from the foreign interest rate. (b) What are the equilibrium values of the real interest rate, the real exchange rate, consump- tion, investment, and net exports? (c) Now, suppose that full-employment output increases to 940. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports? (d) Suppose that full-employment output remains at 940 and that government purchases increase to 132. What are the equilibrium values of the real interest rate, the real exchange rate, consumption, investment, and net exports?

Suppose the exchange rate between the U.S. dollar and the British pound changes from 1.226 to 1.234 dollars per pound. Everything else held constant, this change will cause real GDP in the United Kingdom to and the unemployment rate in the United Kingdom to in the short run. Select one OA increase; increase OB. increase; decrease OC. decrease; decrease OD. decrease; increase

Consider the relationship between exchange-rate changes, aggregate demand, and monetary policy. a. Suppose the world price for raw materials rises, due to a growing demand for these products. On the AD/AS diagram on the right show the likely effect of this on Canadian aggregate demand, given that Canada is a net exporter of raw materials and assuming, initially, no change in the exchange rate. Use the three-point curve drawing tool to draw the new position of the AD curve. Carefully follow the instructions above, and only draw the required object. Price Level Figure 1 Real GDP AS AD G

Determinants of aggregate demand

A5

18. A reduction in the marginal propensity to import will cause A) the ZZ line to become flatter and a given change in government spending (G) to have a larger effect on domestic output. B) the ZZ line to become flatter and a given change in government spending (G) to have a smaller effect on domestic output. C) the ZZ line to become steeper and a given change in government spending (G) to have a larger effect on domestic output. D) the ZZ line to become steeper and a given change in government spending (G) to have a smaller effect on domestic output.

K In 2007 and 2008, Canada was affected by the global financial crisis that had begun with the U.S. housing collapse. By 2009, the Canadian economy had entered a recession, largely due to a reduction in investment and a The policy objective for the Bank of Canada and the government at this time was to OOOOO A. fall in housing starts; shift the AD curve to the left to close the recessionary output gap B. fall in net exports, shift the AS curve to close the inflationary output gap C. fall in consumption; shift the AD curve to the left to close the recessionary output gap D. fall in consumption; shift the AD curve to the right to close the inflationary output gap E. fall in net exports, shift the AD curve to the right to close the recessionary output gap

A10