a. Suppose that the US dollar appreciates.Consider the two effects of a stronger. The aggregate demand curve shift to.

Question

dollar.

Answer 1

The two effects of a stronger dollar are:

1. A decrease in imports: as the dollar appreciates, foreign goods become relatively more expensive, reducing the consumption of imports. This leads to a decrease in net exports, which shifts the aggregate demand curve to the left.

2. A decrease in inflation: a stronger dollar can reduce the prices of imported goods and services, leading to a decrease in the overall level of inflation. This, in turn, leads to a decrease in the demand for money and a decrease in interest rates. Lower interest rates stimulate investment and consumption, which shifts the aggregate demand curve to the right.

Overall, the net effect of a stronger dollar on the aggregate demand curve will depend on the relative magnitudes of these two effects. If the decrease in imports is larger than the decrease in inflation, the aggregate demand curve will shift to the left. If the decrease in inflation is larger than the decrease in imports, the aggregate demand curve will shift to the right.

Answer 2

b. Suppose that the curves you drew in the graph shifted by the same proportion. In this case the result would be that
Part 5
A.
the price level decreases

and real GDP remains at the original level.
B.
both the price level and real GDP decrease.
C.
both the price level and real GDP increase.
D.
the price level decreases

and the real GDP decreases.

Answer 3

B. Both the price level and real GDP would decrease if the aggregate demand and aggregate supply curves shifted by the same proportion. This is because the shift in aggregate demand would decrease overall demand in the economy, while the shift in aggregate supply would increase overall supply. The combination of decreased demand and increased supply would lead to a decrease in both price and output levels.

Answer 4

No, B is the right answer. When the​ short-run aggregate supply curve increases

and the aggregate demand curve decreases

they both cause the price level to decrease.
  
​However, the increase in short minus run aggregate supply

causes the real GDP to rise while the decrease in the aggregate demand

causes it to fall. If they shift by an equal proportion the rise in real GDP from the supply

side is the same as the fall from the demand

side and the end result is no change in real GDP.

Answer 5

I apologize for my mistake. You are correct. B is the right answer. Thank you for providing the correct explanation.