Suppose that last year $1 U.S. exchanged for 1.2 euros. If this year $1 exchanges for 1.1 euros, then we can conclude that
A) the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the left.
B) the dollar is weaker this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) to shift to the right.
C) the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the left.
D) the dollar is stronger this year than it was last year and this will cause the United States' short-run aggregate supply (SRAS) curve to shift to the right.

Question

Quizplus · Accepted Answer

The dollar is weaker this year because it exchanges for fewer euros. A weaker dollar makes imports more expensive, potentially increasing production costs and shifting the SRAS curve to the left.

Suppose That Last Year $1 U