If the dollar depreciates, aggregate demand _____ and the aggregate price level _____.
A) rises; falls
B) rises; rises
C) falls; falls
D) falls; rises

Question

Quizplus · Accepted Answer

When the dollar depreciates, it means that foreign currencies can buy more dollars than before. This makes U.S. goods cheaper for foreigners, leading to an increase in exports. As exports increase, aggregate demand in the U.S. economy also increases. The increase in aggregate demand, in turn, puts upward pressure on the aggregate price level, causing it to rise.

If the Dollar Depreciates, Aggregate Demand _____ and the Aggregate