If the dollar depreciates in value relative to foreign currencies, then aggregate:
A) Demand decreases
B) Demand increases
C) Supply and aggregate demand increase
D) Supply and aggregate demand decrease

Question

Quizplus · Accepted Answer

When the dollar depreciates in value relative to foreign currencies, imports become more expensive, whereas exports become cheaper for foreigners. This results in an increase in demand for domestic goods and services, as they become relatively cheaper for foreign buyers. Therefore, the aggregate demand increases as a result, leading to an increase in economic growth and output.

If the Dollar Depreciates in Value Relative to Foreign Currencies