What effect does a depreciation of the dollar have on real GDP in the United States in the short run?
A)Real GDP will fall.
B)Real GDP will rise.
C)Real GDP will be unaffected by the depreciation of the dollar.
D)Real GDP will be unchanged,but nominal GDP will rise.

Question

Quizplus · Accepted Answer

A depreciation of the dollar makes U.S. exports cheaper and imports more expensive, leading to an increase in net exports. Since net exports are a component of GDP, an increase in net exports will lead to an increase in real GDP in the short run.

What Effect Does a Depreciation of the Dollar Have on Real