Macro - Depreciation of currency

Question 1

KAA 1

Answer 1

K - economic growth
An - WIDEC exports appear cheaper increasing demand. (X-M) component of AD and therefore economic growth (AD outward shift)
Ap -

Question 2

Eval 1

Answer 2

Marshall Lerner - in the short term exports are inelastic so actually worsen current account. Use J curve. If only short term depreciation, therefore no economic growth

Question 3

KAA 2

Answer 3

K - Increase in investment
An - lower exchange caused by depreciation will result in investment from abroad. Multiplier effect - show on AD diagram
Ap -

Question 4

Eval 2

Answer 4

Depends on scale of depreciation relative to other countries which will impact increase in investment