1. Income....... If we earn more, we will buy more foreign 2. Relative price levels of similar goods (Inflation)....... If their prices are cheaper, we will buy more foreign 3. Tastes… peoples preferences 4. Changes in interest rates.......If their interest rates are higher, we will put our savings in their banks 1... Changes in Income : If AD increases, for any reason, incomes are increasing and we will purchase more of everything including imports. More imports that Aggregate Demand and GDP will decrease somewhat. (GDP = C+ I + G + X - M ) Remember is a minus to AD / GDP. “M” This is the "net export effect". If government pursues an expansionary fiscal policy of more spending and/or lower taxes, there will not be the full impact that we hoped for, because of this foreign pull back on Aggregate Demand. This, however, will not negate or offset the expansionary fiscal policy, just not allow it to have the full impact. 2... Relative levels of similar goods (Inflation) : Obviously, if foreign goods are cheaper, we will have more demand for them, and the foreign currency. Conversely, if foreign goods are more expensive, we will have less demand for them and their currency. 3. Tastes… peoples preferences. The do or don’t prefer California wine, etc. 4. Changes in interest rates : If U.S.A. interest rates are higher relative to foreign countries, there will be a flow of money to the U.S.A. for savings, and / or interest earning CD's etc. This will appreciate the value of the $, as there will be more demand for the $. After the $ appreciates foreign goods and services will be cheaper for us, and we will import more. 10…How to setup the FOREX graphs $”. $ Setup the FOREX the This means the goes on the horizontal or “For “X”
1. Income....... If we earn more, we will buy more foreign 2. Relative price levels of similar goods (Inflation)....... If their prices are cheaper, we will buy more foreign 3. Tastes… peoples preferences 4. Changes in interest rates.......If their interest rates are higher, we will put our savings in their banks 1... Changes in Income : If AD increases, for any reason, incomes are increasing and we will purchase more of everything including imports. More imports that Aggregate Demand and GDP will decrease somewhat. (GDP = C+ I + G + X - M ) Remember “M” is a minus to AD / GDP. This is the "net export effect". If government pursues an expansionary fiscal policy of more spending and/or lower taxes, there will not be the full impact that we hoped for, because of this foreign pull back on Aggregate Demand. This, however, will not negate or offset the expansionary fiscal policy, just not allow it to have the full impact. 2... Relative levels of similar goods (Inflation) : Obviously, if foreign goods are cheaper, we will have more demand for them, and the foreign currency. Conversely, if foreign goods are more expensive, we will have less demand for them and their currency. 3. Tastes… peoples preferences. The do or don’t prefer California wine, etc. 4. Changes in interest rates : If U.S.A. interest rates are higher relative to foreign countries, there will be a flow of money to the U.S.A. for savings, and / or interest earning CD's etc. This will appreciate the value of the $, as there will be more demand for the $. After the $ appreciates foreign goods and services will be cheaper for us, and we will import more. 10…How to setup the FOREX graphs Setup the FOREX “For the $”. This means the $ goes on the horizontal or “X”
2018-2019_frsg_apmacrofreeresponsestudyguide.docx.docx