18-11 0 1.Foreign Income 。 When U.S.trading partners go into a recession, the demand for U.S.goods (exports)will fall, and the U.S.AD curve shifts to the left. A rise in foreign income leads to an increase in U.S.exports and a rightward shift of the U.S.AD curve. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-11 1. Foreign Income • When U.S. trading partners go into a recession, the demand for U.S. goods (exports) will fall, and the U.S. AD curve shifts to the left. • A rise in foreign income leads to an increase in U.S. exports and a rightward shift of the U.S. AD curve
1907 18-12 2.Exchange Rates When a currency loses value relative to other currencies: -Export goods produced in that country become less expensive. -Imports into that country become more expensive. Foreign demand for its goods increases. Its demand for foreign goods decreases. The AD curve will shift to the right. When a currency gains value,the AD curve shifts to the left. Economics ECONOMICS MANAGEMENT SCHOOL,TONGJI UNIVERSITY
Economics ECONOMICS & MANAGEMENT SCHOOL, TONGJI UNIVERSITY 18-12 2. Exchange Rates • When a currency loses value relative to other currencies: – Export goods produced in that country become less expensive. – Imports into that country become more expensive. • Foreign demand for its goods increases. • Its demand for foreign goods decreases. • The AD curve will shift to the right. • When a currency gains value, the AD curve shifts to the left