the currency of guatemala is the quetzal, and the currency in the eurozone is the euro. the current exchange…

the currency of guatemala is the quetzal, and the currency in the eurozone is the euro. the current exchange rate is 10 quetzals per euro. what will happen to net exports and aggregate demand (ad) in the eurozone if the exchange rate changes to 5 quetzals per euro? choose 1 answer: a there will be no change in net exports or ad. b net exports and ad in the eurozone will decrease. c net exports and ad in the eurozone will decrease. d net exports in the euro zone will increase, and ad will be unaffected. e net exports and ad in the eurozone will increase.

the currency of guatemala is the quetzal, and the currency in the eurozone is the euro. the current exchange rate is 10 quetzals per euro. what will happen to net exports and aggregate demand (ad) in the eurozone if the exchange rate changes to 5 quetzals per euro? choose 1 answer: a there will be no change in net exports or ad. b net exports and ad in the eurozone will decrease. c net exports and ad in the eurozone will decrease. d net exports in the euro zone will increase, and ad will be unaffected. e net exports and ad in the eurozone will increase.

Answer

Brief Explanations:

When the exchange rate changes from 10 quetzals per euro to 5 quetzals per euro, the euro has depreciated. A depreciated euro makes euro - zone goods cheaper for Guatemalan buyers (as they need to spend fewer quetzals per euro), so euro - zone exports to Guatemala increase. Also, Guatemalan goods become more expensive for euro - zone buyers, so imports from Guatemala decrease. Net exports (exports - imports) increase. Since net exports are a component of aggregate demand (AD = C + I+ G+NX), an increase in net exports leads to an increase in aggregate demand.

Answer:

E. Net exports and AD in the eurozone will increase.