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 long 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 will cause no change in real GDP in the short run because the natural rate of output is already being produced. However, in the long run, the aggregate price level will decrease due to the increased competitiveness of U.S. goods and services in the global market, leading to lower inflation.