If the Canadian dollar appreciates, how will aggregate demand in Canada be affected?
A)Aggregate demand will increase as exports increase and imports decrease.
B)Aggregate demand will increase as imports increase and exports decrease.
C)Aggregate demand will decrease as imports increase and exports decrease.
D)Aggregate demand will decrease as exports increase and imports decrease.
E)Aggregate demand will become more sensitive to price level.

Question

Quizplus · Accepted Answer

When the Canadian dollar appreciates, Canadian goods become more expensive for foreigners, leading to a decrease in exports. Simultaneously, foreign goods become cheaper for Canadians, increasing imports. This combination reduces aggregate demand in Canada.

If the Canadian Dollar Appreciates, How Will Aggregate Demand in Canada