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Author Question: Explain what factors cause shifts of the aggregate demand curve in the open economy model. What ... (Read 16 times)

Awilson837

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on: Jun 30, 2018
Explain what factors cause shifts of the aggregate demand curve in the open economy model.
 
  What will be an ideal response?

Question 2

An increase in the saving rate will not affect which of the following variables in the long run?
 
  A) output per worker
  B) the growth rate of output per worker
  C) the amount of capital in the economy
  D) capital per worker
  E) none of the above


DylanD1323

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Reply #1 on: Jun 30, 2018
Answer to Question 1

The standard of list of determinants that appeared for the closed economy version of the AD relation still exists here (e.g. G, T, ... ). There are several international variables that must be added: Y, E, P and, in a fixed exchange rate regime, i. The domestic price level also affects AD because of its effect on the real exchange rate.

Answer to Question 2

B


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