If speculators bid up the value of the dollar in the market for foreign-currency exchange, aggregate demand will shift to the left.

Question

Quizplus · Accepted Answer

When speculators bid up the value of the dollar, it becomes stronger compared to other currencies. This makes U.S. goods more expensive to foreign buyers and foreign goods cheaper to U.S. consumers, reducing exports and increasing imports. Consequently, this decreases the aggregate demand as net exports are a component of it, leading to a leftward shift in the aggregate demand curve.

If Speculators Bid Up the Value of the Dollar in the Market