If the dollar appreciates in value relative to foreign currencies,
A) aggregate demand decreases because C decreases.
B) aggregate demand increases because C increases.
C) aggregate demand decreases because net exports decrease.
D) aggregate demand increases because net exports increase.

Question

Quizplus · Accepted Answer

If the dollar appreciates in value relative to foreign currencies, it becomes more expensive for foreign countries to purchase goods and services from the US. Therefore, US exports decrease and net exports decrease, leading to a decrease in aggregate demand.

If the Dollar Appreciates in Value Relative to Foreign Currencies