If the dollar appreciates, aggregate demand _____ and output in the short run _____.
A) rises; expands
B) rises; decreases
C) falls; decreases
D) falls; expands

Question

Quizplus · Accepted Answer

When the dollar appreciates, exports become more expensive, reducing foreign demand for domestic goods, leading to a decrease in aggregate demand. In the short run, output is also reduced due to the decrease in demand.

If the Dollar Appreciates, Aggregate Demand _____ and Output in the Short