The exchange rate last month was $1 = 1.15 euros. This month it is $1 = 1.35 euros. We can say that the value of the dollar
A)fell; causing net exports to increase and aggregate demand to rise.
B)fell; causing net exports to decrease and aggregate demand to fall.
C)increased; causing net exports to decrease and aggregate demand to fall.
D)increased; causing net exports to decrease and aggregate demand to rise.

Question

Quizplus · Accepted Answer

The dollar increased in value because it can now buy more euros. This makes U.S. goods more expensive for foreign buyers, decreasing net exports and reducing aggregate demand.

The Exchange Rate Last Month Was $1 = 1