As a result of a decrease in the value of the dollar in relation to other currencies,Canadian imports decrease and exports increase.Consequently,there is a(n):
A) increase in short-run aggregate supply.
B) decrease in the quantity of aggregate output supplied in the short run.
C) increase in aggregate demand.
D) decrease in the quantity of aggregate output demanded.

Question

Quizplus · Accepted Answer

A decrease in the value of the dollar makes Canadian exports relatively cheaper, increasing their demand in foreign markets. This leads to an increase in aggregate demand as companies expand production to take advantage of the higher demand for exports. However, this does not directly affect the short-run aggregate supply or the quantity of aggregate output supplied or demanded.

As a Result of a Decrease in the Value of the Dollar