CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Which of the following will shift the aggregate demand curve for the U.S. to the right?
A. A decrease in the exchange rate for the euro
B. A drop in the price level
C. An economic boom in Europe
Explanation: The shift indicates an increase in aggregate demand. An economic boom in Europe would lead to higher incomes there and increased demand for U.S. exports. A decreased exchange rate for the euro is an increase in the exchange rate for the dollar, or an increase in interest rate would decrease aggregate demand. A drop in the price level would not shift the aggregate demand curve. It would instead cause a movement downward along the existing aggregate demand curve.

User Contributed Comments 5

User Comment
achu Consider "A decrease in the exchange rate for the euro" as a WEAKENING of the Euro; makes our exports more expensive!
cswin if it's expected int change. then A might be correct
ridone Why do we assume people with more money in Europe will demand more American products?
cebus Because in economics we often make huge assumptions that don't always bear relevance to the real world. In this situation though C made the most sense
farhan92 its more to do with a 2 country (well continent) model. This just makes understanding the concepts a little easier and once you've mastered that i'm sure you will be able to figure out how AD would shift under various with many galaxies with infinite planets and countries...
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