If the dollar appreciates while foreign income rises:
A)the U.S. AD curve would likely shift to the left.
B)the U.S. AD curve would likely shift to the right.
C)the U.S. AD curve would likely remain unchanged.
D)what happens to the U.S. AD curve is unclear.

Question

Quizplus · Accepted Answer

The appreciation of the dollar makes U.S. exports more expensive, potentially reducing demand for them, which could shift the AD curve left. However, rising foreign income could increase demand for U.S. exports, shifting the AD curve right. The net effect is unclear without more information.

If the Dollar Appreciates While Foreign Income Rises