Question

The dollar has appreciated against the currencies of many of the U.S.'s top trading partners. What outcome could this fall in foreign price levels have on aggregate demand

Answer 1

Answer: Aggregate demand would shift to the left due to a decrease in US exports.

Explanation When the dollar appreciated against foreign currencies, U.S. goods and services become relatively more expensive, reducing exports and boosting imports in the United States. Such a reduction in net exports reduces aggregate demand.

Answer 2

Answer:

The aggregate demand will fall.

Explanation:

The appreciation of currency makes import cheaper and export costlier. For example, a stronger dollar can buy more commodities from a foreign nation. Conversely, the foreign nation won’t be able to buy more commodities from the U.S. thus, the export will fall in the U.S. and imports will increase. So, a fall in net export results in a fall in aggregate demand.