If the U.S. dollar becomes weaker in international markets, the net effects will include
A) a decrease in short-run aggregate supply (SRAS) and an increase in aggregate demand.
B) an increase in short-run aggregate supply (SRAS) and a decrease in aggregate demand.
C) a decrease in both short run aggregate supply (SRAS) and aggregate demand.
D) an increase in both short run aggregate supply (SRAS) and aggregate demand.

Question

Quizplus · Accepted Answer

When the U.S. dollar weakens, it makes imports more expensive and exports cheaper to foreign buyers. This tends to increase aggregate demand (as U.S. goods become more competitive abroad) and decrease short-run aggregate supply (as the cost of imported goods and inputs rises).

If the US Dollar Becomes Weaker in International Markets, the Net Effects