Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

Figure 20-8

a.1

b.2

c.4

d.3

Expert Solution

Option D.

When a currency depreciates, its value decreases which increases it's net exports and the imports become more costly this will increase the aggregate demand.
Depreciation of currency will cause the price of domestic goods and services to fall when compared to the supply of foreign goods and services.
This shift the Aggregate supply curve to the left when the currency depreciates.
This shifts are illustrated by the 3rd graph in the above figure.

Rahul Sunny answered 1 year ago

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Question

Which of the graphs in Figure 20-8 illustrates the AD-AS shifts associated with a currency depreciation?

Solutions

Expert Solution

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