Suppose that currency traders have increased confidence in the country\'s econom

Question

Suppose that currency traders have increased confidence in the country's economic prospects, bidding up the value of its currency. Aggregate demand (AD) components include consumption (C), investment (I), government purchases (G) and net exports (NX). Analyze what the aggregate demand and aggregate supply model would predict here (assuming everything else remains the same) to answer the following three questions. Which component of AD is primarily affected? What likely happens to the AD curve? What likely happens to the level of unemployment?

Explanation / Answer

Q1
net export :
because many countries start investing in the country

Q2
AD decreases

Q3
unemployment increases

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