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Aggregate Demand or Aggregate Supply - Essay Example

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The article, “The Rising Price of the Falling Dollar”, by Charles Kadlec (http://www.forbes.com/sites/charleskadlec/2012/03/19/the-rising-price-of-the-falling-dollar/) highlights the economic implications of a declining U.S dollar value. Kadlec’s primary concern in the…
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Aggregate Demand or Aggregate Supply
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Aggregate Demand or Aggregate Supply

Download file to see previous pages... The story line of the article is directly based on aggregate demand. Aggregate demand is made up of a number of variables, namely, consumption, investment, government spending, and net imports. A decline in the value of the dollar causes a rise in consumer prices, and higher prices depict the occurrence of inflation (Kadlec, 2012). As a result, consumption becomes relatively expensive, and it is, therefore, bound to decline. In this scenario, government spending increases to fill the gap. Decline in the value of the dollar made imports expensive and exports favorable. Net imports increased due to low imports and high exports activities. This impacts the aggregate demand positively. Therefore, Kadlec’s story had a positive impact on aggregate demand.
The variables that make up aggregate demand directly influence both domestic and international markets. Countries engage in trade and exchange activities using some of the major world currencies. The U.S dollar is a primary currency in international exchange activities. Fluctuations in its value influence world markets differently, especially in relation to changes in consumer ...Download file to see next pagesRead More
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