12-4-07 - Role of Increasing Imports and Exports Exports...

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Role of Increasing Imports and Exports Exports Increase or Decrease Imports Increase or Decrease T/F: When U.S. exports, it’s always good for the economy. False: When our economy is “perfect” it could push us into inflation and if we are already in inflation it could make it worse. 11-29-07
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Another name for Macroeconomics – Stabilization Theory Another name for Microeconomics – Price Theory What does the government do in terms of policy to stabilize the economy? Fiscal Policy elected officials (senate president etc.) Monetary Policy T – G Fiscal r Monetary AD = C + I + G +X – M How does government change taxes? Money Markets Government changes supply of money o Change in Investment is most sensitive (Including Housing) T Change Consumerism G Changes Government Spending Directly Could also change imports and exports. Which way has currency been going? Decreasing Exchange Rates – price of one currency in terms of another
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Fixed o Increase – Revaluation o Decrease – Devaluation Flexible o Increase – Appreciates o Decrease – Depreciates Appreciates – why? Demand goes up Supply goes down on international markets Demand of Currency Increases Value of $ on currency markets goes up. If this summer, Germans come to Disney world what will happen to the American dollar? Why would you want to have another country’s currency? Economic activity Trade If you are going to trade you have to come up with the currency of the seller! What is trade? Buying and selling of products, except seller is in one country and consumer is in another. Travel is equivalent to imports for a country.
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12-4-07 - Role of Increasing Imports and Exports Exports...

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