Classical economists vs. Keynesian economists
![Appreciation/Depreciation N [14-191 14. If the dollar depreciates relative to the peso, the peso will (appreciate/depreciate) relative to the dollar. 15. Appreciation of the dollar will tend to (increase/decrease) American imports & (increase/decrease) American exports 16. The yen price of the dollar has decreased from AM X Y150=$I to YIOO=$I, which means the dolla (apprec/gugs), which (incr/decr) our imports from Japan 17. Depreciation of the euro will (increase/decrease) European exports & (increase/decrease) their imports. 18. If Mexico decides to increase their investments in the U.S., the peso Will (appreciate/depreciate) whi would (increase/decrease) [Mexico's imports U.S. exports to Mexico. 19. If the exchange rate changes so that more Japanes yen are required to buy a dollar then the yen will (appreciate/depreciate) and Americans will purchase (more/less) Japanese goods. Rat" Rate 1 of Dollars Y 120 Y 100 # Of Dollars ](./media/image172.png)
Stagflation is often caused by a SUPPLY side shock.
![The rational expectations theory is an economic idea that the people make choices based on their rational outlook, available information and past experiences. The theory suggests that the current expectations in the economy are equivalent to what people think the future state of the economy will become. Rational Expectations Theory
Investopedia www.investopedia.com/terms/r/rationaltheoryofexpectations.asp ](./media/image177.png)
Current account deficit = Capital account surplus
Capital account surplus = Current account deficit