A depreciation of the U.S.dollar has the same effect on aggregate supply as an increase in foreign prices.

Question

Quizplus · Accepted Answer

Both a depreciation of the U.S. dollar and an increase in foreign prices would lead to an increase in the prices of imported goods, which would increase the costs of production for domestic firms. This would shift the short-run aggregate supply curve to the left, leading to a decrease in aggregate supply. Therefore, both events have the same effect on aggregate supply.

A Depreciation of the U