Question

Weak Dollar Helps Shrink Trade Deficit Price level (GDP deflator, 2009=100) 1407 SAS The United States trade deficit narrowed in May as exports climbed to records. Exports of American-made goods and services totaled $157.6 billion in May, a 0.9 percent increase from April. The declining value of the dollar relative to other currencies, especially the euro, is helping to make American exports cheaper and more attractive to foreign buyers. Growth in exports has been one of the few bright spots for the economy, which has been pounded by housing, credit and financial crises. Tax rebates also are energizing shoppers. The New York Times, July 12, 2008 120 115 The graph shows the aggregate demand curve and the short-run aggregate supply curve in the U.S. economy. Draw a curve that shows the effect of depreciation of the dollar. Labelit. Draw a point at the new short-run macroeconomic equilibrium. 9.0 15.0 10.0 11.0 12.0 13.0 14.0 Real GDP (trillions of 2009 dollars) >>> Draw only the objects specified in the question.

Answer 1

& ADO Depreciation increases aggregate demand shifts rightward to AD, New shost nn equilibrium occurs at of SAS. & AD, the intersection SASO New equilibrium AD, ADO