Other things equal, appreciation of the dollar:
A)increases aggregate demand in Canada and may increase aggregate supply by reducing the prices of imported resources.
B)increases aggregate demand in Canada and may decrease aggregate supply by reducing the prices of imported resources.
C)decreases aggregate demand in Canada and may increase aggregate supply by reducing the prices of imported resources.
D)decreases aggregate demand in Canada and may reduce aggregate supply by increasing the prices of imported resources.

Question

Quizplus · Accepted Answer

Appreciation of the dollar makes Canadian exports less competitive and therefore reduces demand for domestically produced goods, leading to a decrease in aggregate demand in Canada. However, it can increase aggregate supply by reducing the prices of imported resources, lowering production costs and potentially increasing the supply of goods and services.

Other Things Equal, Appreciation of the Dollar