5) In recent weeks the stock markets in the Wall Street has show an unexpected level of ups and downs mainly attributed to the uncertainty of healthcare reform under Trump administration and retail stores closing such as Macys’, JCPenny, Sears, another possible cutting govt. programs (in an effort to reduce budget deficit). In the process, the value of
the $ has risen against the Euro, the Yuan (Renminbi), yen and many other currencies.
- A) Given the current condition of the US economy, do you think US policy makers would prefer to see the $ rise in value, decline in value or stay at its current value? Discuss the advantages and disadvantages to the US economy at this time of a stronger vs. a weaker $. Frame your answer in terms of the current Aggregate Demand and Aggregate Supply situation of the US economy. 3pts
- B) Draw an AS/AD diagram to illustrate your answers for Question A) above. Clearly label axes and the current position of AS & AD relative to full employment RGDP….also indicate any shifts that would occur if the exchange rate of the $ rose sharply against other major currencies