ECON.經濟問題求解答~help

The US dollar increases:

Firstly, this might lead to cheaper foreign materials or services for the local firms. So, their costs of production would falls which would lead to an increase in AS as firms would be able to produce more at the same level of costs. As a result, AS curve would shift to the right. This shift might not be significant because there are still some firms don't import material from foreign countries.

However, as dollar gets stronger, the imports for USA would be cheaper. This might lead to an increase on purchases of import goods.But the consumer spending would be the same because people just buy more imported goods and less US goods. So the imports would rise. On the other hand, American exports would be more expensive and less competitive in other countries. So exports would fall. As AD= C+I+G+X(exports)-M(imports). AD would fall leading AD curve to shift to the left.

How the diagram will look like depends on whether the US economy is in a boom or recession.

In a recession, as AD left and AS right(not significant). AD was low. An increase in AS won't have big effect to the economy because AD curve crosses AS curve at the point near the AS horizontal stage. So the price level would fall a little bit and the output would fall. So, the price level would fall a bit leading to reducing a little bit inflationary pressure. The output would fall leading to unemployment.

In a boom, as AD left and AS right(not significant),AD was high. An increase in AS would have a big effect to the economy because the AD curve crosses AS curve at the point near the vertical stage. Sp price would fall a lot and output level fall. There would be a fall in inflationary pressure , but, there would be an increase in unemployment.

Hopefully, my answer could help you.