A currency appreciation will be most likely to
A) reduce net exports and therefore increase aggregate demand.
B) raise net exports and therefore decrease aggregate demand.
C) reduce net exports and therefore decrease aggregate demand.
D) raise net exports and therefore increase aggregate demand.

Question

Quizplus · Accepted Answer

When a currency appreciates, it becomes more expensive relative to other currencies. This makes exports of that currency more expensive for other countries, which reduces net exports. As net exports are a component of aggregate demand, reduced net exports decrease aggregate demand.

A Currency Appreciation Will Be Most Likely to