Suppose the U.S. dollar appreciates. Which of the following figures shows the correct effect on the IS curve?

Question

Quizplus · Accepted Answer

An appreciation of the U.S. dollar would lead to a decrease in net exports and a decrease in output. This would cause the IS curve to shift to the left. Option B shows the IS curve shifting to the left, indicating a decrease in output, which is the correct effect. Options A, C, and D all show the IS curve shifting in the wrong direction.