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Unformatted text preview: relatively more valuable and thus the price of domestic goods is relatively more expensive than the price of foreign goods. In this case, exports fall and imports rise, causing net exports to decline. Interestingly, a thriving domestic economy will result in a higher real exchange rate and thus lower net exports. Examples of exports include cars and electronics made in the US and sold Asian countries. Examples of imports include fruits and vegetables grown in New Zealand and sold in the US. The equation for aggregate demand of Y = C(Y - T) + I(r) + G + NX(e) has now been deciphered. This equation has many meanings such as output, national income, and GDP. It is difficult, or impossible, to think of economic activity that is not represented in the aggregate demand equation. This is the idea of aggregate demand: to capture all economic activity within an economy...
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- Fall '08