The U.S. exchange rate rises. As a result, there is a
A) movement along the U.S. aggregate demand curve but the curve does not shift.
B) rightward shift of the U.S. aggregate demand curve.
C) leftward shift of the U.S. aggregate demand curve.
D) rightward shift of the long-run U.S. aggregate supply curve.

Question

Quizplus · Accepted Answer

When the U.S. exchange rate rises, U.S. goods become more expensive to foreign buyers, reducing exports and increasing imports as foreign goods become relatively cheaper. This decrease in net exports reduces the aggregate demand, leading to a leftward shift of the U.S. aggregate demand curve.

The US Exchange Rate Rises