As a result of a decrease in the value of the dollar in relation to other currencies, U.S. imports decrease and exports increase. Consequently, there is a(n):
A) increase in short-run aggregate supply.
B) decrease in the quantity of aggregate output supplied in the short run.
C) increase in aggregate demand.
D) decrease in the quantity of aggregate output demanded.

Question

Quizplus · Accepted Answer

Because of the decrease in the value of the dollar, U.S. exports become cheaper for foreign buyers, leading to an increase in demand for U.S. goods and services. This causes an increase in aggregate demand, leading to an increase in the quantity of aggregate output demanded. Therefore, option C is the correct answer.

As a Result of a Decrease in the Value of the Dollar