From June to the end of July 2016 the UK pound sterling fell by 11% against a basket of currencies belonging to the UK’s major trading partners. The diagram illustrates the initial aggregate demand curve AD1 and the initial aggregate supply curve AS1 for the UK economy prior to June 2016. The equilibrium is at X. What will the new equilibrium be for the UK economy as a result of the depreciation of the pound sterling?
- AA
- BB
- CC
- DD