If the dollar appreciates against the yen, ceteris paribus, this will cause:
A)net exports to decline, the rate of increase in aggregate demand to fall, and real GDP to increase at a lower rate.
B)net exports to decline, the rate of increase in aggregate demand to rise, and real GDP to increase at a higher rate.
C)net exports to increase, the rate of increase in aggregate demand to rise, and real GDP to increase at a higher rate.
D)net exports to increase, the rate of increase in aggregate demand to fall, and real GDP to increase at a lower rate.

Question

Quizplus · Accepted Answer

An appreciation of the dollar would make U.S. products more expensive for Japanese consumers, causing a decline in net exports. This decrease in net exports would lead to a fall in the rate of increase in aggregate demand and consequently, real GDP would increase at a lower rate.

If the Dollar Appreciates Against the Yen, Ceteris Paribus, This