Suppose the U.S.economy is producing at the natural rate of output.An appreciation of the U.S.dollar will cause ________ in real GDP in the short run and ________ in the aggregate price level in the short run,everything else held constant.(Assume the appreciation causes no effects in the supply side of the economy.)
A)an increase; an increase
B)a decrease; a decrease
C)no change; an increase
D)no change; a decrease

Question

Quizplus · Accepted Answer

An appreciation of the U.S. dollar makes U.S. goods more expensive for foreign buyers, reducing exports and thus decreasing aggregate demand. This leads to a decrease in real GDP and a decrease in the aggregate price level in the short run.