Answer to Question #232412 in Macroeconomics for Ayush

Question

Examine, analytically and graphically (in a four-quadrant diagramme), the domestic macroeconomic effects of the increase in foreign output, and show that in the new equilibrium domestic prices can be either higher or lower than at the initial equilibrium.

Let E denote the new equilibrium point, corresponding to the intersection of new curves FG and XX, characterized by higher domestic prices. Suppose that the government would like to bring the economy back to its initial equilibrium position (before the increase in foreign output), point E. corresponding to the intersection of the initial curves FG and XX

Answer 1

Based on the macroeconomics effect, companies tend to consider several factors including net exports and demand as way to predict the output. Such incidences force firms to engage into research regarding the market to come up with respective initiative to manage targeted factors.