As a country's currency depreciates:
A) the aggregate demand curve shifts to the left causing an increase in real GDP and the price level.
B) the aggregate demand curve shifts to the left causing a decrease in real GDP and the price level.
C) the aggregate demand curve shifts to the right causing an increase in real GDP and the price level.
D) the aggregate demand curve shifts to the right causing a decrease in real GDP and the price level.
E) the AD curve does not shift.

Question

Quizplus · Accepted Answer

When a country's currency depreciates, its goods and services become cheaper for foreigners, leading to an increase in exports. This increase in exports boosts the aggregate demand, shifting the aggregate demand curve to the right, which typically causes an increase in both real GDP and the price level.

As a Country's Currency Depreciates