ECON 1010 Chapter 26: Chapter 26 Notes part 2

• School: York University
• Department: Economics
• Course: ECON 1010
• Professor: Steven Edwards

Document Summary

Two main influences that the world economy has on aggregate demand are: the exchange rate and the foreign income. The exchange rate is the amount of a foreign currency that you can buy with a canadian dollar. From a foreigners perspective, canadian goods have become more expensive, decrease in exports) An increase in foreign income increases canadian exports and increases canadian aggregate demand. The opposite for a decrease in foreign income. When the aggregate demand changes, the aggregate demand curve shifts. Expected future income, inflation, or profit increases. Fiscal policy increases government expenditure, decreases taxes, or increases transfer payments. Monetary policy increases the quantity of money and decreases interest rates. The exchange rate decreases or foreign income increases. Expected future income, inflation, or profit decreases. Fiscal policy decreases government expenditure, increases taxes, or decreases transfer payments. Monetary policy decreases the quantity of money and increases interest rates. The exchange rate increases or foreign income decreases.