How do the fluctuations in the exchange rate influence the domestic price level?
What will be an ideal response?
When a currency depreciates, the prices of imported inputs will rise. The domestic aggregate supply curve therefore shifts inward, pushing up the prices of domestically made goods and services. By exactly analogous reasoning, an appreciation of the a currency makes imported inputs cheaper and shifts the domestic aggregate supply curve outward, thus pushing domestic prices down.
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The imposition of all taxes, except a Pigouvian tax, leads to ________
A) an increase in consumer surplus B) an increase in producer surplus C) a fall in the price of the good D) a loss in total welfare
The figure above shows the demand for fruit snacks. Which movement reflects a decrease in quantity demanded but NOT a decrease in demand?
A) from point a to point e B) from point a to point b C) from point a to point c D) from point a to point d