Homework Answers
a) As the Europe is experiencing a recession it will lead to a depreciation in Euro and it will make the the exports more competitive and US with a stronger Dollar will import more form the Europe.
b) The exports from the US will decrease. As the exports mainly depend on the income of the foreign nation, a recession will decrease the demand and subsequently it will lead to less imports in the Europe i.e. Us exports will decline.
c) Exports are part of the Aggregate demand for a nation, a decline in the exports will decrease the aggregate demand and shift the Ad curve to the left i.e. at a lower price and and lower output in the US.
d) The price level in the US will decrease. As the aggregate demand has decreased in the US the price will fall.
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Effect of Europe experiences a recession:
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