Why Does an Exchange Rate-Output Combination Lying Above Both DD

question 80

Multiple Choice

Why does an exchange rate-output combination lying above both DD and AA jump first to AA in equilibrium?

• A) Asset prices can adjust immediately.
• B) Production plans can adjust immediately.
• C) to preserve full employment
• D) Prices are nominal and demand is real.
• E) Aggregate demand adjusts faster than output.

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Definitions:

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