Other things being equal, appreciation of the dollar
A) increases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources.
B) increases aggregate demand in the United States, and may decrease aggregate supply by reducing the prices of imported resources.
C) decreases aggregate demand in the United States, and may increase aggregate supply by reducing the prices of imported resources.
D) decreases aggregate demand in the United States, and may decrease aggregate supply by increasing the prices of imported resources.

Question

Quizplus · Accepted Answer

Appreciation of the dollar makes imports cheaper and exports more expensive. This decreases aggregate demand in the U.S. because U.S. goods become more expensive abroad, reducing exports. It may increase aggregate supply by reducing the prices of imported resources, making production costs lower.

Other Things Being Equal, Appreciation of the Dollar