Dollar appreciation raises United States Real GDP when the _____________ shift of the SRAS curve exceeds the __________ shift of the AD curve.

Question

Quizplus · Accepted Answer

When the dollar appreciates, it makes imports cheaper, which increases aggregate demand (AD) through an increase in consumer spending. This shift is leftward. However, if the short-run aggregate supply (SRAS) curve shifts rightward, meaning that firms are willing to produce more output at every price level due to lower input costs, then the increase in real GDP will be greater than the increase in price level, resulting in an outward shift of the SRAS curve. Therefore, the SRAS curve's rightward shift should exceed the leftward shift of the AD curve to raise United States Real GDP.

Dollar Appreciation Raises United States Real GDP When the _____________