Question

1- The coronavirus has caused the value of the US dollar to increase relative to foreign currencies. As a result, the _____ curve of the US has shifted to the _____. This will cause the inflation rate to _____ and the real GDP growth rate to _____.

a- LRAS; left; decrease; increase

b- LRAS; right; decrease; increase

c- LRAS; left; increase; decrease

d- AD; right; increase; increase

e-  AD; left; decrease; decrease

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2- The coronavirus has caused countries throughout the world to enter into recessions. As a result, the _____ curve of the US has shifted to the _____. This will cause the inflation rate to _____ and the real GDP growth rate to _____.

a- LRAS; left; increase; decrease

b- AD; right; increase; increase

c- LRAS; right; decrease; increase

d- AD; left; decrease; decrease

e- LRAS; left; decrease; increase

Answer 1

The phenomenon of increase in the value of a Currency in relation to foreign currency is called appreciation of currency. This causes the value of the home currency to increase i.e. now it can buy more goods and services, imports becomes cheaper. So this leads to an increase in the demand for goods and services as people can buy more with same money.

1. The coronavirus has caused the value of the US dollar to increase relative to foreign currencies. As a result, the AD curve of the US has shifted to the right. This will cause the inflation rate to increase and the real GDP growth rate to increase.

2.The coronavirus has caused countries throughout the world to enter into recessions. As a result, the AD curve of the US has shifted to the left. This will cause the inflation rate to decrease and the real GDP growth rate to decrease.