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Macro economics

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA BT – FIA FBT › Macro economics

  • This topic has 1 reply, 2 voices, and was last updated 10 months ago by Ken Garrett.
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  • March 12, 2022 at 8:05 pm #651185
    Isabella1
    Member
    • Topics: 42
    • Replies: 20
    • ☆☆

    Hello Ken, please explain me this.
    “In exchange rate movements, strengthening currency will make a country’s exports more expensive, but imports will become cheaper. This would tend to reduce the aggregate demand in the economy.”

    If currency value is increasing so it should increase economy and aggregate demand. Why it is decreasing economic growth?
    Aggregate Demand = C + I + G + (X-M) so X is high as Exports are expensive and M is less as imports are cheaper.

    March 12, 2022 at 8:32 pm #651187
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10193
    • ☆☆☆☆☆

    If imports are cheaper, then more consumption will switch from home produced goods to imported ones. M will increase.

    Exports will be more expensive for overseas consumers, so will fall.

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