When the dollar appreciates, the prices of imported inputs
A)fall and aggregate supply shifts outward.
B)fall and aggregate supply shifts inward.
C)rise and aggregate supply shifts outward.
D)rise and aggregate supply shifts inward.

Question

Quizplus · Accepted Answer

When the dollar appreciates, imported inputs become cheaper for domestic firms, which reduces their production costs. This leads to a decrease in prices and an increase in the quantity supplied, resulting in an outward shift of the aggregate supply curve.

When the Dollar Appreciates, the Prices of Imported Inputs