The Ugandan shilling depreciates. How does this affect the IS curve in Uganda?
A)Any change in the value of the Ugandan shilling will cause a movement along the IS curve in Uganda.
B)The depreciation of the Ugandan shilling decreases net exports, and this negative spending shock shifts the IS curve to the left.
C)The depreciation of the Ugandan shilling increases net exports, and this positive spending shock shifts the IS curve to the right.
D)Changes in the value of the Ugandan shilling affect only the IS curves of Uganda's trading partners and not the IS curve for Uganda.

Question

Quizplus · Accepted Answer

The depreciation of the Ugandan shilling makes Ugandan goods cheaper for foreigners, increasing exports and decreasing imports, which increases net exports. This positive spending shock shifts the IS curve to the right as it represents an increase in aggregate demand.

The Ugandan Shilling Depreciates