The U.S. exchange rate rises. As a result, there is a
A) movement along the U.S. aggregate demand curve but the curve does not shift.
B) rightward shift in the U.S. aggregate demand curve.
C) leftward shift in the U.S. aggregate demand curve.
D) rightward shift in the long-run U.S. aggregate supply curve.

Question

Quizplus · Accepted Answer

When the U.S. exchange rate rises, U.S. goods become more expensive to foreign buyers, leading to a decrease in exports. This decrease in exports reduces the overall demand for U.S. goods and services, causing a leftward shift in the U.S. aggregate demand curve.

The US Exchange Rate Rises