In 2008, the dollar appreciated relative to the euro. This appreciation caused and a
)
A) a movement up along the U.S. aggregate demand curve; decrease in U.S. exports to Europe
B) an increase in U.S. exports to Europe; movement up along the U.S. aggregate demand curve
C) a decrease in U.S. exports to Europe; leftward shift in the U.S. aggregate demand curve
D) a decrease in U.S. exports to Europe; a movement up along the U.S. aggregate demand curve

Question

Quizplus · Accepted Answer

When a currency appreciates, it becomes more expensive relative to other currencies, making exports more expensive to foreign countries. Therefore, a dollar appreciation would lead to a decrease in U.S. exports to Europe, resulting in a leftward shift in the U.S. aggregate demand curve.

In 2008, the Dollar Appreciated Relative to the Euro