Multiple Choice Question

The dollar has just appreciated. What will be one result?
Multiple choice question.

Net exports will increase.

Aggregate demand will decline.

Imports will do down.

Exports will go up.

1 answer

If the dollar has just appreciated, one result would be:

Aggregate demand will decline.

When the dollar appreciates, U.S. goods become more expensive for foreign buyers, which typically reduces exports, and foreign goods become cheaper for U.S. consumers, which can lead to an increase in imports. Therefore, net exports may decline, leading to a decrease in aggregate demand.