Suppose that last year $1 U.S. exchanged for 1.35 euros. If this year $1 exchanges for 1.25 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 weaker this year than it was last year but this will have no impact on the United States' short-run aggregate supply (SRAS) curve.

Question

Quizplus · Accepted Answer

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

Suppose That Last Year $1 U