Export Policy: Economic Factors and Exchange Rate Impact

Economics notes Export policy: ● Output gap Capital market - Recession widens, inflation gap narrows Exchange rate - Recession gap narrows, inflation gap increases 4 Net exports 4 contraction 4 deficit 4 recession Total Demand - Positive Demand Shock, Negative Demand Shock ❖ Decrease in Unemployment - Decrease in Inequality, Increase in Inflation Inflation - Increasing Recession Deficit, Decreasing Inflation Gap 4 Period4 4 44 Decrease in Stability Materials and Equipment - Bad Effects Cause Prices to Rise - Bad Effects to Inputs causes Increases if increases - Market planning for quantity and quality of inputs - Product quality affects falling input prices - Product quality Shock Imp Law of Demand Decreases if price rises Increases if price falls Demand changes ● If there is negative demand decreases - Interest rates rise - Government spends less on goods and services, taxes rise - Rest of the world GDP falls - Canadian dollar value rises ● If there is a positive Demand shock, then increases

- Interest rate falls - Government spending on goods and services rises, taxes fall - Total world GDP rises - Canadian dollar depreciates Indirect exchange rate effects: - Real GDP - Unemployment