The exchange rate effect implies that a currency depreciation increases net exports and increases the quantity of goods and services demanded.

Question

BlackTom AI · Accepted Answer

The question presents a statement about the exchange rate effect and asks us to consider how a currency depreciation impacts two quantities.
First, restating the given assertion: a currency depreciation increases net exports and increases the quantity of goods and services demanded.
Since there are no answer options provided, I will analyze the two components of the statement separately.
Net exports: when a domestic currency depreciates, domestic goods become cheaper for foreign buyers and foreign goods become more expensive for domestic residents. This tends to raise exports and reduce imports, leading to an improvement in net exports (NX). Therefore, the claim that net exports increase is consistent with standard open-economy macroeconomics.
Quantity of goods and services demanded (aggregate demand): an increase in net exports raises overall spending on domestically produced goods and services. In the short run, this boost in NX tends to raise real GDP and the quantity demanded of goods and services. Hence, the claim that the quantity demanded increases is also supported by the exchange-rate effect.
Note that the strength of these effects can depend on factors such as the elasticities of demand for imports and exports, the responsiveness of investment to the economy, and the time horizon. In some cases, the pass-through of exchange rate changes to prices, or fiscal and monetary polices, can modify the magnitude, but the directional results—NX rising and higher demand for domestically produced goods—are the conventional outcome.
Because the prompt presents the two components together and suggests they both increase, and because each part aligns with the standard effects of depreciation in the Mundell-Fleming framework, the statement is described as true in this context.
If there were alternative options, a common incorrect alternative might claim that depreciation has no effect on net exports or that it reduces demand, which would contradict the mechanism described above. However, with the information given, the reasoning supports that both net exports and the quantity of goods and services demanded increase following a depreciation.

23115 Economics for Business - Autumn 2025 Assessed Quiz 6 - AD-AS Model

The exchange rate effect implies that a currency depreciation increases net exports and increases the quantity of goods and services demanded.

查看解析

登录即可查看完整答案

类似问题

The exchange-rate effect implies that when the price level increases:

In a consumer society, many adults channel creativity into buying things

Economic stress and unpredictable times have resulted in a booming industry for self-help products

People born without creativity never can develop it

A product has a selling price of $20, a contribution margin ratio of 40% and fixed cost of $120,000. To make a profit of $30,000. The number of units that must be sold is: Type the number without $ and a comma. Eg: 20000

Which of the following statement regarding cost is correct:

Under the assumptions used in cost-volume-profit analysis, as the activity increases:

The CVP and break-even analysis are supported by a range of important assumptions. Which of the following is not an assumption of the CVP:

更多留学生实用工具

考试浏览器助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单