1. Consider the output market and the DD schedule. 1.a. The nominal exchange rate changed. Because of the change, the current account fell. Answer how the nominal exchange rate changed! Increased or Decreased, how the change would shift the aggregate demand curve: Downward, Upward, or No shift, and how the change would shift the DD schedule: Leftward, Rightward, or No shift. Nominal exchange rate: Aggregate demand curve: DD schedule: 1.b. Government changed the tax. Because of the change, the current account decreased. Answer how the government changed the taxi Increased or Decreased, how the change would shift the aggregate demand curve! Downward, Upward, or No shift, and how the change would shift the DD schedule! Leftward, Rightward, or No shift. Taxi Aggregate demand curve: DD schedule: 1.c. Home price changed. Because of the change, Home current account fell. Answer how the change would change consumption: Decrease, Increase or No change, how the change would shift the aggregate demand curve: Downward, Upward, or No shift, and how the change would shift the DD schedule: Leftward, Rightward, or No shift. Consumption: Aggregate demand curve: DD schedule? Deriving the DD Schedule DD schedule: Combinations of output and E on which the output market is in short-run equilibrium. Derived from output market equilibrium: Y = D(EPF/PH, Y T, I, G) Fig. 17-4: Deriving Aggregate demand, D D = Y the DD Schedule Aggregate demand (E2) Aggregate demand (E') E1 q = EPF/PH T => CA 1 => D 1 => YT E DD Y