When the dollar depreciates,this shifts the AD curve rightward and the SRAS curve leftward,leading to a higher price level.

Question

Quizplus · Accepted Answer

When the dollar depreciates, exports become cheaper and imports become more expensive, causing an increase in net exports. This increase in net exports leads to an increase in aggregate demand, shifting the AD curve to the right. At the same time, the decrease in the exchange rate makes imports more expensive, which leads to a decrease in the country's supply of goods and services, shifting SRAS to the left. The combination of these two shifts results in a higher price level.

When the Dollar Depreciates,this Shifts the AD Curve Rightward and the SRAS