If the dollar appreciates, how will aggregate demand in Canada be affected?
A)Aggregate demand will shift to the right as exports increase.
B)Aggregate demand will shift to the right as imports increase.
C)Aggregate demand will shift to the left as imports increase.
D)Aggregate demand will shift to the left as exports increase.
E)Aggregate demand will shift to the left as investment by foreign companies in Canada increases.

Question

Quizplus · Accepted Answer

If the dollar appreciates, imports become less expensive for Canadians and this increases the quantity of imports demanded. This increase in imports will reduce the demand for domestic goods and services, leading to a decrease in aggregate demand. Therefore, the correct answer is C, as aggregate demand will shift to the left as imports increase.

If the Dollar Appreciates, How Will Aggregate Demand in Canada