Essays on Appreciation in the Foreign Exchange Rate Value of the Economy's Currency Assignment

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The paper “ Appreciation in the Foreign Exchange Rate Value of the Economy’ s Currency” is a thrilling variant of the assignment on macro & microeconomics. Lifting the interest rate will reduce the cost of companies and households borrowing, increasing consumption, and investment spending. There the AD will shift to the right from AD1 to AD2 as illustrated by the graph below From the above diagram, in the short run, the AD curve will shift to the right which is a result of lifting interest rate and this will cause the equilibrium shift from point A to B.

However, in the long run, the aggregate demand curve will go back to its original point and therefore equilibrium point will go back to point A An increase in private domestic investment spendingAn increase in the private domestic investment spending would cause the AD curve to shift to the right in the short run but in the long run the aggregate demand back to where it was originally as shown by the diagram below An increase in the good and services tax (GST)An increase in the good and services tax will cause the aggregate demand curve to shift to the left in the short run since there will be a reduction in consumption going on in the economy.

However, in the long run, since these taxes are going to the government then loaned out to companies thus increasing investment and this will slowly shift the aggregate demand back to where it was originally as showed by the diagram below An appreciation in the foreign exchange rate value of the economy’ s currency This would AD curve to shift to the right in the short run but in the long run the aggregate demand back to where it was originally as showed by the diagram below Fall in price of real estate This will cause a price movement in the aggregate demand curve holding other factors constant Exports and imports If a country’ s main export fall in price while imports rise in price people will buy more exports as compared to import hence increasing net exports and the aggregate demand will shift to the right

References

Abel, A., & Bernanke, B. (2008). Macroeconomics. Pearson/ Adison Wesley.

Floyd, J. (2009). Interest Rates, Exchange Rates and World Monetary Policy. London: Springer Science & Business Media.

Knight, F. (2006). Risk, Uncertainity and Profit. New York: Cosimo Inc.

Mckenzie, M. (2006) Aggregate Demand and Aggregate Supply Analysis: Macroeconomic

Schools of Thought

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