All Flashcards
What is currency appreciation?
A country's currency becomes stronger relative to others.
What is currency depreciation?
A country's currency becomes weaker relative to others.
Define net exports.
Exports minus imports.
What does 'stronger currency' mean?
Your money buys more stuff in other countries.
What does 'weaker currency' mean?
Your money buys less stuff in other countries.
Define aggregate demand (AD).
The total demand for goods and services in an economy at a given price level and time period.
What is a trade deficit?
When a country's imports exceed its exports.
What is a trade surplus?
When a country's exports exceed its imports.
Define exports.
Goods and services produced domestically and sold to other countries.
Define imports.
Goods and services produced in other countries and purchased domestically.
How does currency appreciation affect exports?
Exports become more expensive, decreasing demand.
How does currency depreciation affect imports?
Imports become more expensive, decreasing demand.
How does currency depreciation affect exports?
Exports become cheaper, increasing demand.
How does currency appreciation affect imports?
Imports become cheaper, increasing demand.
How does a strong economy affect currency value?
It can lead to currency appreciation due to higher demand.
How does high inflation affect currency value?
It can lead to currency depreciation due to decreased demand.
If the peso appreciates, what happens to Mexican goods for foreigners?
Mexican goods become more expensive, decreasing exports.
If the Canadian dollar depreciates, what happens to Canadian goods for foreigners?
Canadian goods become cheaper, increasing exports.
How does decreased net exports affect aggregate demand?
It leads to a decrease in aggregate demand.
How does increased net exports affect aggregate demand?
It leads to an increase in aggregate demand.
What does a rightward shift of the AD curve indicate?
An increase in aggregate demand, potentially due to increased net exports.
What does a leftward shift of the AD curve indicate?
A decrease in aggregate demand, potentially due to decreased net exports.
On an AD/AS graph, what happens to the price level when AD shifts right?
The price level increases.
On an AD/AS graph, what happens to output when AD shifts right?
Output (real GDP) increases.
On an AD/AS graph, what happens to the price level when AD shifts left?
The price level decreases.
On an AD/AS graph, what happens to output when AD shifts left?
Output (real GDP) decreases.
How are the axes labeled on an AD/AS graph?
Price Level (vertical), Real GDP (horizontal).
What does the AD curve represent?
The total quantity of goods and services demanded at different price levels.
What does the AS curve represent?
The total quantity of goods and services supplied at different price levels.
How does an increase in net exports shift the AD curve?
It shifts the AD curve to the right.